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tv   U.S. Senate  CSPAN  November 15, 2011 12:00pm-5:00pm EST

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quorum call:
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the presiding officer: the senator from vermont. mr. leahy: mr. president, i ask unanimous consent the call of the quorum be dispensed with. pyrite without objection, so ordered. mr. leahy: mr. president, i have 11 unanimous consent requests for committees to meet during today's session of the senate. they have the approval of the minority and majority leaders. i ask unanimous consent that these requests be agreed to and these requests be printed in the record. the presiding officer: without objection, so ordered. mr. leahy: mr. president, i see nobody on either side who wishes to speak, so i ask unanimous consent that all time be yielded back on the two nominations. the presiding officer: is there objection? without objection, so ordered. mr. leahy: mr. president, have the yeas and nays been ordered on the nominations? the presiding officer: they have not. mr. leahy: i would -- well, if you would -- mr. president, when the first nomination is called up, i will ask for the yeas and nays. the presiding officer: the question is on the gleason
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nomination. mr. leahy: mr. president, i ask for the yeas and nays. the presiding officer: is there a sufficient second? there appears to be. the yeas and nays are ordered. the clerk will call the roll. vote:
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the presiding officer: are there any senators wishing to vote or change their vote? if not, on this the yeas are
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87, the nays are 8 and the nomination is confirmed. the question is now on the rogers nomination. is there a sufficient second? there appears to be. the yeas and nays are ordered. the clerk will call the roll. vote:
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the presiding officer: are there any senators wishing to vote?
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the presiding officer: any senators in the chamber wishing to vote or change their vote? if not, on this, the yeas are 89, the nays are 6. the nomination is confirmed. mr. leahy: mr. president. the presiding officer: the senator from vermont. mr. leahy: mr. president, i ask unanimous consent that the senate stand in recess until
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3:00 p.m. the presiding officer: would the senator withhold? mr. leahy: of course. the presiding officer: under the previous order, the motion to reconsider is considered made and laid upon the table. the president will be immediately notified of the senate's action, and the senate will resume legislative session. the senator from vermont. mr. leahy: i thank the chair. after decades of doing this, i should have remembered of course we have to notify the president. i recall when -- one day when we went into session, the beginning of the session, swore in new senators. one was the new senator from new york, hillary clinton. the president of the united states was sitting up in the gallery when we reconvened as a senate, the usual notice was said to notify the president that the senate has
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reconvened -- or has convened for that session, at which point several of my colleagues rather audibly pointed out the president, you don't have to notify him, he is sitting right up in the gallery. with that, i ask unanimous consent the senate stand in recess until 3:00 p.m. the presiding officer: without objection, so ordered. the senate stands in recess until 3:00 p.m. again see the senate live when they return here at 3:00 p.m. eastern on c-span2.
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>> several the republican presidential candidates are campaigning in iowa this week including newt gingrich who was in west today nine -- west des moines. here is look at ccci coverage of the speaker. and the new poll. >> a new poll shows a new pair of front runners in the republican race for president. >> last week polls showed herman cain and mitt romney leading the pack. but today it appears romney and newt gingrich are neck and neck. cain and perry virtually tied for third place. gingrich is hoping to cash in on that momentum in iowa. laura nichols caught up with gingrich in west des moines. she talked to him about his newfound status. >> gingrich when asked about the rise in the polls
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although he showed a series of strong debate performance he knows as well as anyone else that this race is volatile and poll results change all the time. it's not every day a presidential candidate shows up in your office cafeteria. on mondays not so typical lunch hour, guide one insurance employees got a chance to chat and take pictures with newt gingrich. >> we need iowa citizens to get bigger because we'll make washington bureaucrats smaller. that is why i ask you to it be with me. >> former speaker of the house has seen a recent surge in popularity. latest cnn poll places gingrich neck-and-neck with mitt romney. when asked about it, gingrich joked about his newfound rise in the polls. >> better than when i was at four. look this, is the most volatile race of my lifetime. who knows what the polls will be two months from now. i'm not going to tell you i'm on the way. >> ccci political analyst agrees, saying gingrich
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could be just the new flavor of the month. >> republicans are still desperately looking for an alternative to mitt romney and many of the other candidates have had their moments in the sun and why not gingrich at this point. >> gingrich has had to overcome some major obstacles. back in may he lost major support after saying this on "meet the press". >> i don't think right-wing social engineering is anymore desireable than left wing social engineering. >> the next day during a trip to iowa, gingrich got an earful. >> you're an embarassment to our party. >> i'm sorry you feel that. >> why don't you get out before you make a bigger fool of yourself. >> in june his entire iowa staff quit. since then he had to revamp his campaign relying heavily on volunteers. he also made a push to spend more time in iowa and will soon open a campaign headquarters in des moines and iowa city. >> we got off track for a little while. i think we're back where we're going. we'll have a series of announcements this week and next week. >> gingrich also headed to
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jefferson and carroll today. he will be in iowa through wednesday and then back again on saturday for the family leaders thanksgiving family forum in des moines. >> laura nichols live in the newsroom. thank you, laura. even if gingrich wins the republican nomination the same cnn poll shows voters prefer president obama by nearly eight point margin. out of top four republican candidates in the poll only romney leads obama as their prefered choice. >> see more videos of candidates at c-span's web site for campaign 2012. from the recent events to the earliest part of the their campaigns. reed latest comments from candidates and political reporters and social media sites and link to c-span partners in the early eye caucus states, iowa, new hampshire and south carolina. all at testified before the senate budget committee today about the effect the
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federal budget has on the economy. the joint deficit reduction committee has a deadline at the end of next week to put forward a plan to reduce the deficit by 1.2 2kr08 over the next 10 years. -- 1.2 trillion. three the members sit on the committee including the democratic co-chair, senator patty murray. >> the hearing will come to order. i want to welcome, everyone to the senate budget committee today, particularly our witness, congressional budget office director, douglas elmendorf. thank you very much for being here. thank you for your good work. in today's hearing we'll
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again focus on the economy and steps that can be taken to strengthen the recovery and create jobs. last year at my request the congressional budget office completed analysis of the so-called bang for the buck achieved by different fiscal policy proposals. cbo has now updated that work so we thought it would be useful to have director elmendorf here today to report on his agency's latest conclusions. i'm hopeful that congress will consider cbo's analysis in developing any near-term economic growth measures that might be passed before the end of the year. i'd like to begin by briefly reviewing the economic situation now confronting the nation. it's clear that economic recovery that we are now experiencing is not what it should be or what we would like it to be. here are some of the factors i believe that are holding back the economy.
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unemployment remains stubbornly high. the housing crisis that helped spark the downturn is continuing. we have weak consumer confidence and weak consumer demand. personal debt is still near record levels. businesses and consumers still face tightened borrowing standards. state and local budget cutbacks are continuing to create a drag on job and economic growth. and our debt is also a challenge to future economic growth. among these factors the continuing housing crisis is particularly notable. if we look back at the seven previous recoveries we can see a surging housing market was a driving force behind the return to economic growth. housing starts rose dramatically in every one of those recoveries. but in this recovery housing starts have remained low, and continue to be.
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we know that some of the drag holding back the recovery is caused by the nature of the recession that preceded it. economists have found that following recessions caused by or act cop -- accompanied by a severe financial crisis, recoveries tend to be shallower and take much longer. two leading economist, dr. carmen reinhardt and dr. vincent reinhardt found in their research, and i quote from their findings, real per capita gdp growth rates are significantly lower during the decade following severe financial crises. in the 10-year window following a severe financial crisis, unemployment rates are significantly higher than in the decade that preceded the crisis. the decade of relative prosperity prior to the fall was importantly fueled by an expansion in credit and rising leverage that spans about 10 years. it is followed by a lengthy
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period of retrenchment that most often only begins after the crisis and lasts almost as long as the credit surge. . . >> and we have now had 20 consecutive quarters of growth or 20 consecutive months of growth. however, clearly we have to do better. we need considerably more job growth in order to fuel a stronger recovery. the unemployment rate remains
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far too high. as of october the unemployment rate was still hovering at 9%. although the recovery is not as strong as we would like, it is important to recognize our economic situation would be much worse if we had not had the federal response to the recession and the financial crisis. including both the fed's monetary policy action and the fiscal policy actions taken by congress and the administration. that federal response, i believe, pulled the economy back from the brink and likely prevented us from slipping into a depression. and it may have not been slipping into a depression, we may have gone headfirst into a depression. two other leading economists, dr. mark zandi who was an adviser to the mccain presidential campaign, and dr. alan blinder, former vice chairman of the federal reserve, completed a study last year that
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measured the impact of federal actions on shoring up the economy. here is a key quote from their report. we find that its effects on real gdp, jobs and inflation are huge and probably averted what could have been called depression 2.0. when all is said and done, the financial and fiscal policies will have cost taxpayers a substantial sum, but not nearly as much as most had feared and not nearly as much as if policymakers had not acted at all. if comprehensive policy responses saved the economy from another depression as we estimate, they were well worth their cost. this next chart shows dr. zandi and dr. blinderrers estimate of the number of jobs we would have had without the federal response. it shows that we would have had 8.1 million fewer jobs in the second quarter of 2010 if we had not had the federal response. we see a similar picture in the
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unemployment rate. according to dr. zandi and dr. blinder's findings, if we had not had the federal response, the unemployment rate would have been 15% in the second quarter of 2010 and would have continued rising to 16.2% in the fourth quarter of 2010. looking forward, it is clear there are further steps that can be taken to help shore up the recovery in the near term. cbo's analysis looks at some of these steps and determines which would provide the greatest bang for the buck. in spurring economic growth and job creation. here are cbo's key findings. on the upper end of the scale, it shows that policies like extending unemployment insurance and an employer payroll tax cut give you a higher impact on gdp for each dollar spent. on the bottom end of the scale, cbo once again found that
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extending the bush era tax cuts provide a much lower impact on gdp for each dollar spent. it also found that a repatriation tax holiday provides very little bang for the buck. i look forward to hearing more about these findings from director elmendorf. to be clear, there is nothing contradictory about pursuing near-term economic growth measures at the same time we pursue long-term debt reduction. we can and we must do both. we need to give a near-term boost to the recovery while simultaneously put anything place policy -- putting in place policies that will bring down deficit and debt over the long term. the deficit reduction can be phased in after the recovery is on a stronger footing, but it should be enacted into law now. want to be very clear about this. on every group that i have
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served whether it's the fiscal commission or the group of six, we adopted that basic strategy. and it is clear we must put into law now a long-term deficit reduction plan. i believe that would provide a significant boost in confidence in the markets as people see the government finally putting its fiscal house in order. with that, we'll now turn to senator sessions for his opening remarks. >> thank you, mr. chairman. thank you, director elmendorf. we respect the work that you do, and we rely on it. but, um, not unaware just reading, rereading recently alan greenspan's testimony before this committee quoting cbo numbers projecting in 2001, projecting 30 years of surpluses and that we would pay down the entire debt of the united states of america, and he wondered what to do with the surplus. so we've been wrong before.
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you predicted 3.1% growth this year, it's going to come in probably half that. dr. zandi predicted 3.9% growth this year. now they've revised that, i think moody's analytics, to 1.6. i don't agree, mr. chairman, that there's no contradiction between borrowing and taxing to spend today and the problems that have gotten this country into the fix that we're in. as i see it, we are in a long-term financial difficulty as a result of debt. we have excessive debt throughout the system. the government has assumed huge amounts of private debt. and i agree, we've got a ten-year or more maybe deleveraging process to go through. and we're just not going to see the growth that we like to see
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until that's through. so i would oppose adding more debt. i think nothing could be more simpler. nothing could be more basic. and under the plan that the president has proposed, $450 billion in borrowing and spending in the near term plus a $450 billion tax increase, i don't believe that that's going to be a ten-year benefit to the economy. and i would be delighted to hear your view of it, mr. elmendorf. and i do appreciate the fact that you predicted when we passed the first $800 billion stimulus package, you predicted that in the short run there would be some benefit, but over ten years you predicted there would be a net negative because there is a reality of debt out there that just can't be wished away. all of that was borrowed. all of that added to our debt.
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and i'm sure you would agree that after the ten years since we've paid none of that, we will have paid none of that down, that it will continue to be drag on the economy for decades to come long after the short-term sugar high we may have achieved as a result of it. so i'm very concerned about where we're going. i'm concerned, mr. chairman, about the committee of 12. mr. zandi told us just a few weeks ago we had to have $4 trillion in reduced deficit. $4 trillion, he said, at an absolute minimum as has every other witness, as has you've said, and i am not aware that they're moving toward that kind of agreement. we're still in denial, it seems to me. so if we've learned nothing else in the financial crisis in 2008, it is that prosperity cannot be built on a foundation of debt.
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excessive debt, public and private, provided the air that pumped into the economy, resulted in the burst bubble. surely we know debt is not solution. not more debt. and if there's a second lesson we should have learned, it is a healthy skepticism for washington elites, many of the same people who fell asleep at the switch before the housing bubble did not see it coming, and they're urging us to create more debt in the government. a government bubble. i call 'em affectionately sometimes masters of the universe. they're quick to make confident predictions and even quicker to explain why the failure of their last prediction should not count against the one they're just making today. they say mammoth stimulus failed because it wasn't big enough. the explosion of regulation helped the economy.
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we need more regulation, they say. advocates for more stimulus frequently cite cbo's economic model, but cbo projected a long-term negative growth. in 2009 cbo stated in its report -- and it certainly appears that you've been correct -- quote: the increased debt will tend to reduce the stock of productive capital, and the debt will crowd out private investment. cbo's projections were that -- your projections also are that, um, reducing the deficit by $2 trillion would eventually boost economic growth by .5 to 1.4%. so that's a good sign. that tells us what we need to be doing which is reducing debt. so we need a long-term plan in a time of crisis, confusion and fear. we should return to basic, core principles, the tried and true.
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pay your debt, spend within your means, and instead of asking the taxpayers for a bailout, washington must end the dishonest accounting accountingd abuse that we have in our country. what we need is a middle class agenda. that means creating jobs through the private sector, producing more american energy, making the government lean and productive, confronting our dangerously-rising debt, adopting a globally-competitive tax code, upholding the rule of law in trade, commerce and immigration and, finally, delivering the good people of this country the honest and responsible budget they deserve and haven't had in over 900 days. thank you, mr. chairman. >> thank you. two quick things i'd say. we may have a disagreement about short term, but we have an agreement about long term. the debt is the threat. it would be, i think, a huge boost for this country, i think
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it would be a boost globally if special committee came back with a ten-year plan that reduced the deficits in the range of $4 trillion. i tried to convince the fiscal commission to do $6 trillion over ten years. we could have balanced the budget with that size of a deficit adjustment and debt adjustment. and it's not that hard to do. that's, you know, i think some people think this is so hard to do, it's impossible. >> not impossible. >> i showed our colleagues one plan that i did that if you added 6% to the revenue that we project now and reduced expenditures 6%, you would save $6 trillion over ten years. and call it the 6% solution. now, we could have a debate, and we can have a discussion about what the mix should be, revenue and spending.
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maybe some people want to do it all spending, maybe some people want to do it all revenue, maybe some people want to do it 2 to 1 or 3 to 1, spending to revenue. to me, the real issue is how do we find a way to come together to get the job done. it is a serious obligation. let me just say on the question of not having a budget, we passed the budget control act. the budget control act provides a budget for this year and next. we may not like it, but that is the law. it is the law of the land. the budget control act passed. signed by the president. it lays out the budget for this year and next year. and it provided for this special committee that is, in effect, a reconciliation process clear and simple. so we've got a budget. we may not particularly like it,
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particularly agree with it, but we've got one. and we got it in the budget control act. >> mr. chairman -- >> yes, sir. >> just to follow up on part of what you were saying. and you quoted, i believe, rogoff and reinhart -- >> reinhart and reinhart. >> the otherses -- [inaudible] >> um, a financial crisis takes longer term. i think that has a little bit of a misconception to most here. they think financial crisis means a bank crisis. but really it means a debt financial crisis. in other words, people at the time this bubble burst were saving nothing in the united states. we were actually showing, we were drawing down our savings which is really unprecedented in our history. so individuals had great personal debt. the government is now running for the third consecutive year
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trillion dollar debts, and we've taken over huge mortgage problems and liabilities from banks and assumed that on the public sector. so it's a simple thing. you either default on your debt which has an immediate, short-term, painful ramification, or you somehow carry the debt over a longer period of time and try to pay it off and reduce it. and the problem is that when you do that, it's a depressant on the economy. money's being spent not to consume, buy or purchase, but money's being consumed to pay down debt or pay interest on the debt. we're not close to paying down the debt as of today. so i guess i acknowledge, and i think we all need to understand that we're going to be in a long-term effort to move ourselves out of this deleveraging period, and the first thing you should do is not
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administer to the debt -- add more to the debt and acknowledge it's going to be a tough period of time. and then we need to do everything possible that helps working americans be successful by creating a climate for long-term growth. we can all disagree and will agree on a lot of how to do that, but that's where i am on it. i think that's where most of the american people are. and i look forward to hearing mr. elmendorf. thank you. >> yeah. let me just say with respect to the reinhart study, when they're talking about financial crisis, they're talking about not only the circumstance of individual states, but also damage to the financial institutions including private sector institutions. when you have that kind of dramatic break in the financial markets and damage to the balance sheets of the major
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lending institutions, that has an effect on credit going forward. so what they've found is when you have an explosion of credit as we did before this downturn, in part fueled by federal reserve policy, interest rates kept abnormally low for an extended period, fiscal policy, very loose fiscal policy under the control of congress and the administration -- we were running massive deficits even then -- that combination, i believe, coupled with a lack of regulation of derivatives and the explosion of aig did enormous damage to the financial structures both private and public and exploded debt, both public and private. and the result is you've got financial institutions with impaired balance sheets which means they can't extend credit in the same way they normally would. and that's what they find in
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their study. first, you have a credit bubble, and then usually ten years in duration, and then you have a recovery about the same period of time. so, you know, we've cooked a real stew. >> yeah. >> we've cooked a real stew. >> you're right. and i guess i will, i think we both can join together and say this is not going to be an easy fix. there's no quick fix out there. and how we handle it, we'll all have to work together and do what's best for the country. i just believe that the quick fix days are over. l and as one of our witnesses said not long ago, you get the stimulus benefit from spending today, and it's a year or two maybe benefit, but if you're in a period of a decade working your way out of this economic difficulty, then the hit hits
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you before the ten years is up, before you're out of the debt -- out of the recovery. so that's why i don't think we can any longer continue the short-term sugar high stimulus spend and create more debt because it's simply going to catch us before the ten years is up. and we need to have an honest, long-term plan. the president needs to be far more honest with the american people about how difficult this is and do it in a long-term view, not a short-term view. thank you. >> the place you and i agree, that we can, we clearly have a disagreement short term. the place we have agreement is longer term. and somehow collectively we have got to find a way to be successful here in changing course. when we're borrowing 40 cents of every dollar, revenue the lowest it's been in 60 years, spending the highest it's been in 60 years, certainly i think we can
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agree we've got a serious problem. and we've got a collective responsibility to dig out of it. director elmendorf, apologize for this early discussion, but i think it's important to have. please proceed with your testimony, and then we'll go to questions. >> thank you, chairman conrad and senator sessions. to all the members of the committee, i appreciate the invitation to testify today about the outlook for the economy and policy options for increasing output and employment during the next few years. as you know, the u.s. economy has struggled to recover from the deep recessionment although total output started to expand more than two years ago, the pace of the recovery has been very slow compared to world war ii, and the economy remainses in a severe slump. we expect that under current law growth and output will remain slow, and as a result, job gains will be limited.
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leaving unemployment rate close to 9% through the end of 2012012. 2012. given the cbo's outlook for the economy which is similar to that of many private forecasters, a large portion of the economic and human costs of this downturn remain ahead of us. we think the economy is only about halfway through the cumulative shortfall in output relative to the potential level that could be achieved if our labor and capital were more fully employed. the costs of that shortfall are immense in total, and they fall disproportionately on people who lose their jobs, who are displaced from their homes or who own businesses that fail. concerns about the weak economic recovery have prompted the consideration of fiscal policy actions to spur economic growth and increase employment during the next few years. cbo assessed the cost effectiveness in boosting the economy of a variety of possible changes in tax and spending
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policies. figure one from the testimony reproduced on the back of a single piece of paper in front of you summarizes our findings. the figure shows the estimated impact on years of full-time equivalent employment in 2012 and 2013 per million dollars of budget tear cost. -- budgetary cost. to be sure, this measure of cost effectiveness is only one of the criteria that might be applied in evaluating policies. other criteria are discussed in the written testimony. for each policy we show a range of estimates reflecting the uncertainty that accompanies any analysis of this sort. the policies that we estimate would have the largest effects unemployment in 2012 and 2013 per dollar of budgetary cost will policies that would be targeted toward people who would be most likely to spend the additional income. such as increasing aid to the unemployed, shown in the top bar
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of the figure, or providing additional refund bl tax credits for lower and middle-income households, the next bar down. or policies that would reduce the incremental costs to businesses of adding employees such as reducing employers' payroll taxes which is the top bar in the second bank, or reducing employers' payroll taxes only for firms that are increasing their payroll which is the bar below that. the policy that we estimate would have the smallest effects on employment in 2012 and 2013 per dollar of budgetary cost are policies that would effect businesses' cash flow, but would have little impact on their incremental incentives to save -- to hire or invest. examples include reducing taxes on business income and reducing tacks on repatriated foreign earnings shown in the bottom two bars in the middle bank. despite the near-term economic benefits that would arise from reductions in taxes and increases in government spending, such actions would add
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to the already large projected budget deficits. unless off setting actions were taken to reverse the additional debt, the nation's output income would be lower than it otherwise would have been. if policymakers wanted to boost the economy in the near term while also achieving long-term financial stability, a combination of policies would be needed, namely changes in taxes and spending that would widen the deficit now but reduce it later in the decade. supported by households, businesses. lawmakers -- also the
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government's role in a particular sector of the economy or change trade relationships. uncertainty about future government policies and economic conditions. cbo considered some potential changes in policies related to energy and the environment, the financial and health care sectors and international trade, but there are few analytic tool for estimating the near-term effects on overall economic activity of such changes, so we did not attempt to quantify the effects of those potential changes with any precision. in our judgment, however, the effects of the specific changes in regulatory policies or other policies apart from fiscal policies that we considered
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probably would be too small or would effect the economy too slowly to make an important difference in overall output or employment during the next two years. i should emphasize the policy changes of this sort are illustrative rather than exhaustive. many other changes are possible. our overall analysis does not address other considerations in evaluating such policy changes including the long-term effects on the economy, on people's health and on the environment. thank you, i'm happy to answer any questions you have. >> thank you for your testimony, thank you for your work. let's go back to the conversation that senator sessions and i were having. we didn't have this fuller discussion and this fuller debate because the country needs it, and i think this body needs it. and so let's go back to that conversation that we were
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having. senator sessions and i began this hearing by agreeing on the danger of our longer-term debt situation. i've said many times to my colleagues the debt is the threat long term. do you see danger in our long-term situation, and if so, what form does that danger take? >> as you know, mr. chairman, under current policies u.s. fiscal policy is on an unsustainable path. federal debt is already very high relative to our total output compared with our historical experience, and it's on a path under current policies to continue to rise. and that can't go on indefinitely. the costs of that are manyfold, partly that rising debt crowds out private capital investment and reduces future output and incomes. also that extra debt needs to be serviced, we need to pay
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interest on it, and that crowds out future government spending or forces increases in future taxes. the runup in debt also means that policymakers have less flexibility in responding to unexpected developments; international crises or crises at home. and beyond all that there is the increasing risk as debt rises of a fiscal crisis in which investors will lose confidence in our government's ability to manage its finances and thereby the government will lose the ability to borrow at affordable rates. when, um, that sort of crisis might hit we cannot predict. it depends not just on the level of debt at a point in time, but on expectations and expectations not just under current law or current policies, but also a sense of the ability of the political system to confront the nation's fiscal challenges and make deliberate choices to try to stay out of danger. >> well, i think you said that
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very well, and i agree with that. senator sessions, i won't speak for him, but he's made clear how serious he believes this debt threat is. so how could it be that there would be any benefit from fiscal measures taken now that would increase our debt? >> i recognize that it may seem like a paradox that rising levels of debt are bad for the economy in the long run, but nonetheless, if used in certain ways -- as we're talking about in our testimony -- could be good for the economy in the short run. but it's not really a paradox. it simply recognizes that the nature of the economic challenge that we face as a country is somewhat different over the next few years than it is over the medium run or long run. over the medium run or long run, economists in general agree that the restraint on our output, our
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incomes is the capital stock, it's the quantity and quality of our labor force, it's our level of technology and the way we bring these inputs together in businesses. um, but in the short term, again, most economists agree the constraint on our output and incomes today and next year and the year after that is principally in a weak demand for goods and services. we have the factories and equipment to produce more. we have people who would like to work to produce more. and the reason they're not fully employed is a lack of demand for goods and services. so in the short term what can strengthen the economy -- and that analysis and the analysis, i think, of a broad swath of economists -- are increases in spending and cut in taxes because those can either spur public demand for goods and services or through lower taxes in private demand for goods and services.
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but in the medium term and long term, surely enough that would be counterproductive. and even if one does this in the short term and gets a short-term boost, unless one offsets that extra accumulation of debt, then one would be a little worse off in the long run than otherwise. there are various complicateing forces around that. it matters what you spend money on today publicly or privately, it matters how you address the long-term fiscal challenge, of course. but as a general rule the extra amount of debt that would be accumulated under policies of the sort that we've analyzed here would be bad for the economy in the medium term and long term even though it would provide a boost to output and employment in the short term. and it's not really a paradox, it really just reflects the nature of the economic challenge which is different at different points in time. >> all right. i thank you for that explanation. let me go to some of the specifics of what's in your study because i think it's very important to understand that. let me just say, um, i notice
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there is a difference between what's in this study and the previous study in that as i understand it this is looking at a two-year effect, the previous study was looking at a five-year effect, is that correct? >> the previous study looked at one-year, two-year and five-year horizons. we focused, in this case, on a two-year horizon. >> here you're on a two-year. the five-year infrastructure was much higher up on the list in terms of bang for the buck. here when you're looking at a shorter time horizon, infrastructure drops down, and these other more short-term measures -- increasing aid to the unemployed, providing refundable tax credits to lower and middle income households, reducing employees' payroll taxes, subsidizing interest rate on certain mortgages that are refinanced -- those things move up in relative position. you know, i mean, let me just make clear my own bias. i tried very hard when we were
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doing stimulus to have more infrastructure. i argued strenuously for package of 200 billion of infrastructure largely focused on transportation. the argument made then against it was from analysis that we're seeing here. that is, it takes longer to get infrastructure spending into the bloodstream. my argument was after a fiscal crisis, you're going to have a downturn that lasts longer, therefore, having something that hits later -- not a bad thing, may be a good thing -- i wish that view had prevailed then because we are in a longer-term period of weakness. so tell me about infrastructure. why in your analysis when you shift from a five-year focus to a two-year does infrastructure drop down? >> so you have --
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>> in terms of bang for the buck. >> you have it just right, mr. chairman. if we had shown here the five-year effects, infrastructure would have looked relatively better. um, for just the reason you say, which is that that money takes some time to get out the door. um, and certain projects as we know can happen fairly quickly; repaving of roads can be done fairly quickly. but more substantial projects generally take years to complete, and the money, basically, is spent over those sets of years. >> do you know how long it took to build the pentagon? >> they did that very rapidly. that was an unusual experience, as you know, mr. chairman. >> you know, that's the argument i made in this circumstance. we were in an unusual circumstance in 2009, and the answer to the question is it took nine months to build the pentagon. nine months. now we seem to think we can't do things, and in part we have done
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it to ourselves. um, i can tell you in my state we are having an energy boom of incredible proportion. we are now the fourth largest oil producer in the nation, and we're headed for second or third. and i'll tell you what, we have a need for thousands of people to work in north dakota right now. we need thousands of people to work there. why aren't they there? because they don't have a place to live. we don't have a place -- i just was in williston, north dakota, in the heart of the oil boom. i had a school administrator tell me she's got 14 children to come to school there every day who are living in their parents' vehicles. they don't have a place to live. our unemployment's the lowest in the nation. less than 2.5%. we have a need for thousands of people to work. we need to build roads. it takes over a thousand
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truckloads, some tell me 2,000 truckloads to do one well. and our roads are clogged. people are dying on our roads. these are two-lane roads right through the heart of oil country. we need to build roads. that could employ thousands of people. my god, let's get to it. and this idea that we can't do anything, we can't get the money out the door, i know in normal times we can't get the money out the door. when do we go to a serious footing of let's get it done? you know, i believe of deeply in my state if somebody would help us get some of the things that would normally we'd do in if normal order of business we'd get out of the way, we could get a lot done. i'll let you respond.
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i've used my time, and i'll go to senator sessions. >> i think you're right, senator, it depends crucially on what else you get out of the wayment projects -- way. projects generally require bidding, there are reviews of various sorts for environmental purposes and others, and that's part of why i think it does take longer today to complete large projects than it did when they built the pentagon. you're also right, though, that under our forecast and the forecast of most private sector people and quite consistent with the evidence from reinhart and reinhart you cited, we expect there to be a shortfall in demand for goods and services and still excess numbers of unemployed people well beyond the two years that we focused on in these particular calculations. we have the unemployment rate coming back down to close to 5% only by 2017, i think, in our august forecast. which is six years from now. so there can be justification. depends, of course, on the priorities of you and other members of congress. but there can be a macroeconomic
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justification for continuing to have that sort of impetus to spending out for an entire five-year period. >> senator sessions. >> thank you. well, with regard to this chart that you provided to us, it is important to note it's just 2012, 2013. and, for example, on infrastructure improvement would not be complete then, so you'd have some productivity gains in the out years, correct? >> yes, that's right. >> in the months since this is mis-- in some sense this is a misleading thing because you tend to favor immediate expenditure items like reducing payroll taxes or unemployment insurance because that money goes out immediately. so this chart has some misleading characteristics to it. and if you're looking at a longer period of time. is that correct? >> well, the question you asked does influence the answer that
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we can provide for you, senator. i think the primary difference between what this chart looks like and what a chart over five years will look like is the one that the chairman pointed out, the infrastructure spending would move up. if one looks back at our table from the report last january, um, most of the other items have roughly the same ranking of cost effectiveness over the five-year span and the two-year span. >> one thing that's really important, i think, is that you note in your report on page 25 as a result of your ongoing review and relevant research, cbo has reduced the lower end of its range of estimates on the short-term effects of changes in fiscal policy, on output and employment while leaving the upper end ranges unchanged. so, basically, your experience, perhaps, with the first stimulus
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made you less optimistic about how large the short-term benefit would be from spending, borrowing and spending today. >> it's not so much our experience with the recovery act, senator, as the review of the literature and the evolution of the economics literature. there is some new research based on the experience of the past few years, but most of the research on which we and others -- >> okay. whatever you -- some of that research is probably based on the stimulus, i would hope, which didn't achieve the goals that we hoped for, in my opinion. but, um, you know, i was in evergreen, alabama, and an african-american stood up at the town hall meeting and said as my granddaddy said, always said, you can't borrow your way out of debt. we're in deep debt today, and we are making proposals to fix our debt crisis by borrowing more money. now, the president's proposal
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did call for a tax increase to pay for this $450 billion increase, did it not? >> we didn't study the economic effects carefully, but, yes, you're right about that, senator. >> and an increase in taxes has some negative effects on the gdp growth, does it not? >> yes, although the amount, of course, depends on the nature of the tax increase. as i say, we didn't study the economic effects of the president's -- >> and with regard to your letter to senator gregg that the ten-year stimulus package would have a net negative on growth over ten years, um, i recall asking secretary geithner about that, and he seemed to be surprised. um, didn't think how it was possible you could spend $800 billion and not have improvement over ten years. but do you still adhere to the
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view that that would be a modest gdp reduction as a result of the stimulus package that did pass? >> well what our letter said, senator, was the effects on the level of gdp at the end of the ten-year window would be negative -- >> that there wouldn't be as much gdp growth at the end of the window as that would have been without the bill passing? >> let me be clear. our estimate is the cumulative growth in gdp over the ten years from that legislation was positive. what we said was there'd be a big boost at the level of gdp in the first three or four years, and then that relative -- what would have happened to gdp without that law, then the effect on gdp would go back down below zero. so the level of gdp -- i'm sorry, the level of gdp would be a little lower at the end. i'm sorry. let me be more careful. that is net negative effect -- >> and in the next ten years
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since you're carrying that debt and paying interest on it and the stimulus value is long since gone, it would be a continual negative of some effect -- >> yes. a drag on the level of gdp beyond that if no other actions were taken, that's right. >> um, you noted this, the effectiveness of deficit reduction, you released a report earlier this year, the macroeconomic budgetary effects of an illustrative policy for reducing budget deficit. and i concluded that a set of policies that would reduce the deficit by $2 trillion over the next ten years would increase long-term economic growth by as much as 1.4%. is that still your view? >> yes, it is. again, it would raise the level of gnp at the end of the decade
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by something between .6 and 1.4%. >> and i guess it's axiomatic that in the abstract lore debt helps an -- lower debt helps an economy be more vibrant and would improve gdp. >> yes, that's right, senator. >> um, is one of the things that the united states has worldwide is our currency is a reserve currency throughout most of the world. is that an advantage for our economy? this. >> absolutely, yes, senator. >> well, i just looked at this week's barron's headline. i don't know if you've seen it. the world's next reserve currency. and on the cover of barron's is the chinese yuan. and it says by 2020 -- that's not too far off -- expect china's yuan to be widely used alongside the weakening euro and dollar in international trade as
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a store of value. would you agree that that's a, not a positive development for the united states' economy? and my time -- >> yes, i'm sorry. i wouldn't make predictions about the, about how quickly the u.s. dollar might be supplanted as the reserve currency, but certainly if u.s. dollar were supplanted as a reserve currency, that would be costly for our economy. >> and part of that is a concern of our debt at least in our trade deficits, but with specifically as to our debt the american debt is a factor in the worldwide concern over the united states dollar as a reserve currency, is it not? >> yes, absolutely. >> and fixing that would help strengthen our currency,
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fixing -- reducing our debt would improve the viability of the united states dollar as a reserve currency. >> yes, senator. >> would you -- basically, senator conrad suggested in the, and i think it's good -- some of the things that benefit the united states economy as a result of the dollar being a reserve currency? >> well, one thing that we've seen very clearly in the last few years is that, um, in moments of, um, great worry by investors around the world about the safety of different investments, they come to the united states with their money, um, viewing us as a safe haven. um, additionally, a lot of transactions are conducted in dollars, and that demand for our financial assets, um, helps to keep the united states financial system, um, at the center of the global financial system even
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when our own financial system is struggling as it has in the past few years. and that is, um, as you said, that is one of -- we risk losing that advantage, um, if we allow our debt to continue to rise relative to gdp. >> and we have the ability to print more dollars within a limited range before adverse impacts occur. but if that goes too far, that too could be a part of the devaluing on the currency and the loss of confidence in it, is it not? >> yes. if our inflation rate returns to levels it was at in the beginning of the 1980s, for example, that would also weaken the dollar's role in international financial transalaskas. transactions. >> thank you. >> thank you, and thank senator sessions for asking that. i think it's very important we get that on the record.
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the role of america's reserve currency. as a reserve currency, the importance of it. senator begich. >> thank you very much, mr. chairman, and i want to -- i appreciate the debate you guys had a little bit earlier before we started the hearing, actually, i thought it was interesting listening. but i guess, first of all, i'll make a couple statements, then i'll have a couple questions. we can argue the recovery bill added debt, so did the two wars added debt, so did the unpaid tax program for millionaires and billionaires added debt, unpaid for. we're paying for it now, we'll pay for it forever, it seems, at the race that we're going. so, i mean, i like debating history, but that's irrelevant to where we need to get going here, and i appreciate the debate, but where we are today is we have an economy that, you know, we could argue if that recovery bill didn't happen would we have more unemployment? would we have, you know, every month we can argue if number is
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strong enough. but since i've been here in '09 when i got sworn in a month and a half later we've had positive job increase every single month. now, it could be varied, some is very small, some is significant. but we could argue that without that short-term recovery bill, that number could have gone the reverse. we don't know that. that's the great mystery of the work you have to do as an economist and as someone who works with all these numbers. but the fact is i could predict that before, you know, in if '08 we were averaging in the last quarter 5-600,000 jobs lost a month. a month. now we're at least in a positive territory. we would argue that 9% is a rate we don't want, which i agree, but is actually somewhat stagnant right now which is a good thing. it's stabilizing. the fact is, it's not going this way as it was doing as we moved into '09 and the beginning of
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'10. it was just going click, click, click, now it's stabilized. we have certain segments, again, we could argue if this worked or not, but i would argue the automobile industry was the walking dead two years ago. or driving dead. and today the american auto industry is thriving. matter of fact, "wall street journal" had a great article, the automobile industry headline was "automobile industry imports jobs from china." that's a reversal. we have more activity, they're the strongest companies since 1998 profiting. so we could argue the theory of what could have happened, should have happened, whatever. but the fact is here we are, unemployment is more stabilized, gdp isn't where we want it to be, the auto industry as one great manufacturing industry of this country is moving up, selling more vehiclings. well importation of jobs from
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china. i can tell you in the seafood industry which is important to alaska, some of the processing that's been going on in china is moving back to the united states because as the middle class grows in china, what happens? wage rates go up, fuel costs are high, it's better to do it here. so you can look at pieces and draw your own conclusions, but we are where we are. we've got to get the unemployment rate down, we've got to get consumer confidence higher. and let me take off on the issue. i agree with the chairman in regards, and of course he hit my issue, energy. his state is now recognizing, i think, in a robust way the power of energy in the development of number. you mentioned, actually, in your testimony fuel costs have a direct impact to consumers. but also development of domestic supplies, as you just heard, had not only an effect on the jobs in the oil patch states, but a ripple effect as you build roads and infrastructures and schools and hospitals and facilities that service this industry. and i guess i'd love if you
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could just add a little bit to your comments that were around energy. i mean, i agree. i mean, the pentagon was built in nine months, disneyland in california was built in one year, a whole city when you think about it. can we do this? i'll tell you, when i was mayor of anchorage, we built a $100 million-plus convention center about 24 months from the date of the idea. not drawn up, the date of the idea to completion which involved bonding, voter approval and construction, design bid, everything. so anything's possible if we want to do it. so tell me some thoughts on the energy sector and what we can be doing. i mean, obviously, i'm biased. i think we should be opening up anwr, give me your thoughts there if you could. >> so we -- >> i didn't mean to go on there, but i got a little, you know, we spend a lot of time talking
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about what could have and should have happened. we are where we are. democrats and republicans are both to blame on both sides. it's time to get busy and get stuff done around this place. that's what americans are saying to me every day. and energy is one of those great opportunities, and if i could just say one more piece. from an economic security, but from a national security we have enormous resources spent overseas to protect oil flow. when we could be spending it here in this country building our economy up. >> so, senator, our focus in this testimony was on the short term, on the next few years, and the points we note about, um, efforts the federal government might make to encourage investment in energy is that those effects are likely to, um, not have a big impact on the overall economy in the next few years partly because, and you, i think, mentioned this in a way in talking about your experience before coming to the senate. state and local officials have a very important role to play in
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the siting of energy facilities and what companies are able to do. so the federal government can't, um, can open up certain areas, um, that are now closed, but it can't just easily sweep away all the other factors, um, that effect the pace of energy exploration. um, that's part of it. and secondly, even if a decision were made and all of the approvals were granted to begin drill anything a certain spot -- drilling in a certain spot right now, that takes some time to happen. so at the moment most of the rigs that are designed to drill, for example, deep waters offshore are committed to be somewhere in the near term. and if more space was opened up for further exploration and drilling, then over time, of course, that would lead to more drill anything those places. but not, we think, of a magnitude in the next few years to effect the overall economy. that isn't to say those things
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are good or bad to do. there's lots of other factors that can weigh in that decision, as you mentioned, but the focus here was on the short-term impact on the overall economy. >> right. but i would argue with you that just the idea of development, just the -- i will tell you in two years since i've been here, there's been at least some renewed interest in the arctic. just by that alone, a couple industries have hired well over several hundred, several hundred employees just to start the analysis of what's possible. or shell who just is in the process of finishing a ship that's being constructed in the last year and a half. i mean, it's built in louisiana, it's being shipped now to seattle ports. these are hundreds and hundreds of jobs, well-paying jobs. and so i would argue how we define short term, we have to be careful that it's -- do we want, for example, energy production, it to be happening? yes. but three years ago north dakota? i mean, you know, i will tell you my mother would drive from minnesota to carson city,
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nevada, where she'd live, she'd go through north dakota, no problem, find a place to stay. she went through there this summer, she had to keep driving. now, she's in her 70s and driving late at night is not the best thing we'd like her to do, but i will tell you in two and a half years the short-term development in that state as an example -- so i would just, and i didn't mean to get on my energy rant, but maybe, mr. chairman, we could -- i just think that energy both nonrenewable and renewable is an incredible short-term and long-term opportunity that we have underestimated in this country, and we continue to spend billions with countries that hate us in order to get energy supplies to this country. it makes no sense to me. so maybe as a budgetary discussion -- i will take you chuck gc, anwr, these are in the
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hundreds of billions of dollars. hundreds of billions of dollars. that's idle. so i guess, hopefully, maybe we'll have a broader discussion. i didn't mean to rant on my energy. but the chairman triggered me. because we don't want to be number three in energy production that north dakota's about to take us over here. we're working to be number one. so let me end there. >> let me just say i agree entirely with the senator. maybe it'd be useful in this committee to have an energy hearing because it's got a huge budget implication. huge. >> absolutely. >> senator johnson. >> thank you, mr. chairman. i've got to hop in on the old energy bandwagon here. this isn't a mystery to me why we're not creating jobs, why our economy isn't growing. as a business person, i was actually making those investment decisions for 31 years. you take a look at our regulatory environment. you want an answer why we can't build the pentagon in nine
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months? because of all the regulations. do you think we could do the hoover dam again? you know, why did president obama kick the can down the road on the keystone xl pipeline? why aren't we drill anything anwr? government regulation. we're killing ourselves. we're doing it to ourselves. so i guess when i take a look at your testimony, with all due respect, i couldn't disagree more with your conclusions. my own experience, again, in the making those investment decisions, if you allow business owners to keep more money, they will invest it. recent history in terms of short-term stimulus, i mean, isn't it true that, basically, what happened with a lot of those stimulus dollars is consumers because of their fear basically just deleveraged? the they didn't really stimulate the economy. i mean, isn't that by and large correct? >> so we expected it, some of that money would be saved. it's hard to know in retrospect exactly what happened in that episode because we can't track
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those particular dollars. >> but we can see that we already did a payroll tax holiday, we've extended unemployment benefits, and it hasn't worked. all we've done is incurred an additional $4 trillion worth of debt, another trillion coming onboard this year, and what's really preventing businesses from investing is the fear that, you know, the end result of all those debt and deficits. when government spends more money than it has, we know as business people that eventually government's going to take. they're going to tax you more, or they're going to create inflation, and can that's why the business community is simply not investing. i mean, don't you basically agree with that conclusion? >> so, senator, we believe and have written right in this testimony that uncertainty about future government policies, future tax and spending policies, future regulatory policies are a factor that is restraining businesses' decisions to invest and hire and households' decisions to spend. but we don't think that's the principle factor.
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and, for example, surveys of small business people done by the national federation of independent business shows that the main difference in the obstacles that businesses report or themselves facing today relative to a few years ago is a weakness in demand for their -- >> because everybody is afraid of a european contagion, that the exact same thing is going to happen in the united as is happg in -- in the united states as is happening in greece, in italy. what i want to concentrate on is the debt and deficit, and i want to talk about the real risks that i don't think we are really acknowledging now in this country. let's first start out by not achieving the growth targets that cbo estimates, and i have no idea how you come up with your estimates. you know, i'm assuming in this analysis you used similar estimates that said you were going to grow at 3.1% this year, and we're not going to achieve that growth. i think your estimate is for every .1% reduction in growth, we add $310 million to the
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ten-year. >> that sounds right, yes, senator. >> so if it's only 1 president less -- 1% less, that's an additional $3.1 trillion in additional debt. >> yes. >> i've seen other studies. that's a significant risk, correct? is. >> oh, yes. no doubt. and you can see in the pictures we showed today, we have very wide bands, our estimate for each of these policies, because we recognize the uncertainty of the analysis that we're doing. >> not a lot of people are talking about that very significant risk. why is that? are we just afraid to acknowledge it because all we're doing in the supercommittee is trying to come up with $1.2 trillion in the reduction in the rate of growth in spending. >> so i guess, senator, from my perspective people are talking about that risk. they have not reached agreement in is supercommittee as far as i know, and so they -- and the congress has not enacted some legislation to reduce deaf sets -- deficits, but more than
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was done in the budget control act over the summer. my sense is, actually, people are talking about it a lot, but that agreement on how to address it remains elusive. >> well, people are certainly fearing it. let me go to another area of significant risk, and this is going into exactly cbo projections which i think are totally wrong when it comes to the health care act. according to cbo only 3.6 million people were estimate today lose their employer-sponsored care and get dumped in the exchanges. how did you ever come up with 3.6 million people? what economic model came up with that number? >> so our model takes account of incentives facing households and businesses to get insurance coverage through various possible avenues. um, and other people who built models of the insurance, health insurance market, um, have actually reached rather similar conclusions to ours about the effects of the health legislation, that includes the actuaries at cms, researchers at the urban institute, at rand and
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other places. of and it does surprise many people, um, that we don't show a larger loss of employer-sponsored insurance coverage. i think it's worth remembering here that most people now receive and will continue to receive significant subsidy to buy health insurance through their employer through the tack code. >> have you -- let me stop you. you seen douglas holtz-eakin's matrix which proves economics is in the employers and employee's best interest for 35 million people to get dumped in the exchanges? is. >> we've seen that analysis, but we've reached a very different conclusion. as i was saying, for most workers they will get no or smaller subsidies through the insurance exchanges than they receive through the tax code. they don't have an incentive to go to the exchanges. >> his analysis would have increased our deficit in the first ten years by over half a
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trillion dollars. when i saw that decision matrix as somebody who'd bought health insurance for 31 years, i called him up and said, doug, this is a pretty good analysis, but you're still wrong. let me run through what the real decision factor's going to be as an employer and, again, somebody who's been buying health care for years. according to the cbo in 2016 the average cost of family cover per year will be $15,000 which, by the way, is $2,100 more expensive than it would have been had we not passed the health care law. put that aside. so an employer is saying i can pay $15,000, or i can pay a $2,000 penalty, and i'm no longer throwing my employees to the wolves, i'm making them eligible for very large sub si -- subsidies. by the way, $13,000 more than the median income, that's a $10,000 subsidy.
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now, the fact of the matter is we've had the mckenzie study that showed 50% of employers that are informed are planning on dropping coverage very shortly after this health care act takes effect. when that happens, if that's half, 180 million people get their insurance through their employer-sponsored care. half of them would be 90 million people at about $4,000 subsidy, that'd cost us close to over $400 billion as opposed to the $95 billion. i mean, isn't that pretty accurate? is. >> so, senator, um, what -- you're right that employers, um, who put their workers into the insurance exchanges would not be throwing them to the wolves in the same sense as the exchanges in place. nonetheless, their employees would then be forgoing a very large tax subsidy. and a majority of people, of workers, um, who would have employer-sponsored health insurance without that law are eligible for no subsidy through the insurance exchanges. and you get a substantial
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subsidy with the tax code, so there's no reason for the firm to put them into the exchange. that is against the interests of the workers. >> no, but it's in the interests of the employer. okay, again, the decision is 15,000 or pay 2,000 and make my employee eligible for a $10,000 subsidy. and, again, the survey show employers that are informed, 50% right now are saying they're going to drop coverage. how can you continue to deny that and totally understate what our true rate of debt and deficit are going out ten years? we are really misleading the american people on this factor. >> i have to disagree with you, senator. there's a great deal of uncertainty around our estimates, and we've said that every time we've talked about them, i think. but, um, we -- it is not true that for most workers they're eligible for substantial subsidies through the insurance exchange -- >> your own cbo spread shets show that the average costs of
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subsidy in the 2021 will be $7,000. of those 3.6 million -- [inaudible conversations] again, the eligibility is, well, we can -- >> eligible or a minority of workers. and we've read that survey, we've read other surveys that have reached those conclusions. for what it's worth, when cbo measured adding the drug benefit to medicare, we had to make an estimate of how many drug makers would stop helping retirees. and shortly after we did the estimate there were surveys in which a lot more employers said they would drop coverage than we'd estimated. but in fact, at the end of the day, fewer than cbo estimated. so surveys are not always -- >> i understand. but in light of these surveys that say 50%, that's 90 million people. 50%. and you're going to stick to your 3.6 million estimate? you think that's a good estimate? >> senator, we're always valuing
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our estimates and taking onboard new information. in fact, we talked today already about revisions that we made to our estimates of the effects of the sort of fiscal policies we're talking about today. so we are not averse to changing our estimates when there is new evidence, and if there is evidence that we find compelling -- >> okay. i'd ask you to review that evidence and, i'm sorry, mr. chairman. >> no, i think it was a, i think it was a valuable exchange. and we need it. the country need it. we've got to be -- it's important to have this debate. senator whitehouse. >> thank thank you, chairman. mr. elmendorf, welcome. >> senator. >> if the debt of our country is so important, and i think it's pretty widely believed around the senate that it is, um, and if that debt which is so important can be reduced from
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two sides -- it can be reduced by spending less, and it can be reduced by revenue increase -- if that is the fact that the debt is so important and you can reduce it either with increased revenues or with spending reductions, in that environment why is it so important that the highest income americans pay lower actual tack rates -- tax rates than regular working americans actually pay? and to illustrate the point that the highest income americans pay lower actual tax rates than regular working americans pay, i look at the irs data for the top 400 income earners who earned over a quarter of a billion
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dollars each and paid i want to say an 18.3% all-in federal tax rate. and for rhode island, at least, that equates to where a regular taxpayer hits about $40,000 in if income, about what a truck driver in rhode island makes. so you've got the debt -- the tax rate increases as your income increases to a point, and you cross through that 18.2% barrier, and you hit about $40,000 which is, as i said, a truck driver's bureau of labor statistics average pay in rhode island. and then you go out to the far end where people made a quarter of a billion dollars, and they're paying the same 18%. why is that so important to our economic prosperity that we have this tax code in which super
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high-end income earners are paying such low tax rates? >> so, senator, you asked the question as if i had said it was so important. so just to be clear, i don't think i've said the things that you're asking me to justify. um -- >> maybe there's a rhetorical cast to my question. >> perhaps. [laughter] on a if you can chul matter, i would say by our estimate the average federal tax rate, so all federal taxes -- income, payroll, corporate profits tax and so on -- as a share of household income rises as one moves up the income distribution. ful and we report every year or so, we go up to the top 1%, and we estimate the top 1% has a higher average tax rate than the top 5% which is higher than the top 10% and so on. um, whether it is higher enough, um, for your preferences, i can't judge. um, economists think with, i think, substantial evidence that tax rates affect people's
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behavior, and that higher tax rates on work, income from labor affect how much people work and save. so in setting tax rates, there are multiple objectives -- >> so is the irs information wrong that shows that the 400 highest income earners paid only 18.2% in the most on the year and the year before that it was only 16.7% which equates to a hospital orderly in rhode island if you look at the famous helmsly bill, the irs also reports by zip code they were at 14.7% overall, and they're doormen, and they're janitors. they paid higher tax rates. how does that square with your figures? those are actual irs-reported dollar numbers. >> i haven't looked at that. i'm confident that they're reporting accurately what they're reporting, so i presume there is some difference in what
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concept they're reporting relative the to the concept we're reporting. the last numbers we've released are from 2007, and i know from folks who have looked at their data that the, um, incomes at the top have changed over the last few years. so maybe that is part of what changes tax rates in the past few years. it's also possible that the irs is looking only at certain taxes. maybe that's just income taxes, we're looking at the broader measure taxes. i don't know, senator, but i'm happy to have us look into that for you and see if we can explain the differences. >> well, here's what interests me. we just went through a fairly considerable exercise here in the senate trying to pass jobs legislation. um, we had the president's original jobs bill, and that was filibustered, and then we went through different elements of it. and until the veterans piece, they've all been filibustered. this was jobs legislation that
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would create real jobs, it was paid for, um, it was paid for so it wouldn't add to the debt in any way. it was paid for in a way that required an additional contribution from americans who were making more than a million dollars a year but only on the income over a million dollars a year that they were making. so -- and over that point it got filibustered. is there an economic rationale for stopping those jobs bills in order to protect the over $1 million income of over $1 million income earners? does that work through cbo formulas to be a win for the economy when you've protected that income from taxation
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without -- and cost the american economy the jobs that would have been created? >> we didn't analyze the economic effects of those bills, so i can't be sure. um, my guess is that if we did analyze it, we would find that those bills would spur output and employment in the next few years because the stimulative effects of the additional spending would probably outweigh, in our stills, the -- in if our estimates, the negative effects of the higher tax rates over the next few years, over the longer term, than the disincentive effects of higher tax rates would tend to end the additional debt, would tend to be a drag on the economy. and then that -- one could wave that off against the short-term economic gains, one could weigh that off against distributional objectives that one has in the longer run and so on. >> let me close by observing, mr. chairman, that there's been a certain amount of criticism of the reinvestment act here for
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only having stopped the employment crash that president obama inherited without having recovered from it. um, and i would say that, clearly, it would be better if we could have recovered from it more rapidly, but it is important, i think, that we stop ped that jobs crash. i think we were at 7 to 800 jobs being eliminated every month when the president took office. and just to bring it home to rhode island, um, for the 11,000 families that had a member getting a paycheck because of the reinvestment act, for the 11,000 families who had that paycheck and for the coffee shop and the grocery store and the toy store and the mechanic that
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they were all able to go and pay for goods and services from, we were actually pretty glad that that reinvestment act took place. and i think those 11,000 families would feel that they had one heck of a worse time without it. and so would the communities around them who would not have received the benefit of their income had they went around and spent it in the way that people do. so rhode island's not a big state, 11,000 folks with a job instead of being on the unemployment line, 11,000 families with a paycheck instead of not. that's pretty real, and i think that we shouldn't underestimate that. thank you. >> well stated. senator widen. >> thank you, mr. chairman, and i commend you, mr. chairman, for a good hearing and an important one, particularly timely because of the supercommittee. and that's what i want to ask you about, dr. elmendorf
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because, fortunately ks r, one of the issues that is very much in play, it goes right to the heart of this debate about stimulus and particularly stimulus right now. as you know, over the last five years i've had the chance to work with two colleagues on the other side of the aisle who would certainly call themselves, you know, conservative. former senator gregg and senator coats and senator begich. two democrats, two republicans have worked on this over the last five years. and i want the talk about the stimulative effect of what would happen if tax reform was enacted, certainly n2012313 -- in 2013. in other words, there's discussion about the timing of 2012 and 2013. but let's talk about, say, 2013. under the legislation that i've put together, bipartisan effort,
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if you're a couple that makes $50,000 a year, $60,000 a year, $70,000 a year, you would get permanent tax relief. permanent tax relief. of 3 to $4,000 a year, the typical person. and that comes about largely because what we do is we triple the standard deduction for those families. so the couple now gets about $10,000, it would triple to $30,000. so what that means for a couple making 60 or $70,000 a year, it, in the effect, puts half their income off limits from taxation. my sense is that that would be, based on your analysis at page 26 of the report, fiscal policy options for assisting households would be a pretty good stimulus for the economy if that was to
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be enacted so it applied in 2013. you want to walk me through that? because it certainly ties to other things that you've said in the past in terms of business decisions and production leads to more investment and hiring. that's sort of economics 101. and it seems to me there'd be significant stimulative effect in cutting income taxes permanently for those folks in those kinds of income brackets, 50, $60,000, we'd also do it for people making $30, $35,000 as well. why don't you give me your assessment of the stimulative effects here. >> um, as you know, senator, we have not attempted to analyze the many economic effects that
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will arise from a comprehensive tax reform of the sort that you've developed. but you're right that reductions in taxes for has holds, um, especially if reviewed as permanent reductions, would tend to spur spending by those households. though further down the income distribution or the less wealth, um, with assets held by households, the more likely that extra income is to be spent. that's why we expect that increases in aid to unemployed would have a particularly large bang for the buck. um, but for other households as well, additional income would tend to raise their spending. of course, we'd have to keep track of all the aspects of your reform proposal to know how that would net out, but i think the channel you describe is certainly one that would take effect. >> well, i appreciate that, and i think it's a fair comment. part of the reason that i asked, and you're absolutely right when you look, you have to look at
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all the pieces of the puzzle. .. >> but would generate more revenue, which as you know is something that your companion organization, joint found with the legislation that i authored with senator gregg and senator coats.
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any sense of what families making 50, 60, $70,000 would do in terms of their purchases if their taxes were cut, the destiny of what i'm talking about, 50%? my sense is they would go out and make those kinds of, you know, consumer purchases, consumer durables that had a big economic multiplier. so, let's had to analyze this in terms of the area you have looked at which is largely the lower income brackets, a but load that i'm talking about, say 30, $35,000, but doesn't the evidence showed they go out and make purchases in areas like consumer durables have pretty good multiplier? >> i think, i mean, their interest in doing large-scale purchases depends importantly on the expectations going forward. but your statement under your proposal is a big permanent
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feature, would certainly amplify the effects on their large-scale purchases, is what you're describing there and in general as we've said a number of times, many members of the committee has said the uncertainty about what will happen to u.s. fiscal policy, what the tax people will face, government programs, benefits might be cut, deficit reduction efforts, is a component of the uncertainty that's facing households and firms, and he turned their spending. larger source of uncertainty, people face is incomes before tax, the demand for products and so on. but the uncertainty about government policy is important, and the extent to which that can be resolved through any actions of the congress are reduced uncertainty, we think that with a good thing for the economy spent i'm glad you mentioned that with respect to the judgment of individual, because i think individuals much like
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businesses are in the general mode of being cautious. they don't know what's going to happen, and they look at yet another proposal that is temporary in nature. i think people come up to me and say, ron, these temporary ideas, what could happen is when you'll are done with their different ideas, everybody which is go back to fighting. and then they see the economy not building up a sustained recovery. so i think the point that you have made today need to ring loudly in this debate about tax reform. and i appreciate your going through this with me, because i think the chance is part of the permanent tax reform, through in effect put off limits from taxation, 50% of what households may, making 30, 40, 50, 60, $70,000 is a chance to really change behavior in the
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marketplace because people will see it is not just another temporary proposition. so i think this is very helpful and i'm going to try to get your message to the super committee, and with your answers, try to highlight this as we go into the last days debating the opportunity for the super committee to pass pro-growth tax reform that could kick in exactly the kind of timetable that you identified in your important report. thank you, mr. chairman. >> i want to thank the senator from oregon. i just want to say publicly that the senator from oregon is one of the most constructive members on this committee and in the body. and i appreciate the really extraordinary amount of work that the senator has put out on the major controversies and challenges facing the country, whether it is tax policy, whether health care policy, trade policy, it really is quite
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extraordinary that the senator who does not have the staff of a chairman of the committee has put out very significant plans in a bipartisan way that are really well thought through. and i just want to say that the senator deserves all of our commendation for producing really solid work. and big amounts of it. senator merkley. >> thank you very much, mr. chair, and thank you, mr. elmendorf. i appreciate the work here to analyze strategies for increasing economic growth and unemployment. i was looking through to see if there was any specific analysis of addressing energy-saving retrofits. i don't believe that it is
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there. i have a memory of a previous cbo product which looked at various strategies for green jobs. and my memory is that energy-saving retrofits was at the top of the list, and if i recall right the analysis went like this, there isn't a longtime flag you have for major infrastructure, that the construction industry is flat on its back and ready to be put back to work, that the labor cannot be outsourced so the dollars occurred here in united states, virtually all the materials that are necessary for energy-saving retrofits our manufactured in the u.s., so there's extraordinarily low leakage. i thought all this was analysis that was behind cbo's analysis of this, this piece of the puzzle. i didn't see that in here. maybe i am misremembered that cbo had looked at bats as a job creation strategy, maybe it was
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in some of the think tank proposal. but has cbo looked at that issue? >> i'm sorry, center, i don't never having written about that. but i might be mistaken, and we can check to be sure. the fact is, i think the factors you described are important factors. whether the workers are available, need jobs who can do this sort of work, extent to which certain sorts of products are imported or not can matter. so the factors you described sound like part of a analysis of the so we do, but i don't remember that particular piece, i'm afraid. >> okay, thank you. and if cbo hasn't analyze that, i might request whatever fashion is necessary that you would take a look at that, because certainly we are looking for specific strategies that maximize the bang for the buck in terms of job creation, and i would certainly like to know if
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that is a strong cost effective strategy. let me go on to a macroeconomic concern that i have. so this is less about things that we can do in the next year or the year after that it is about trends over the last decade and was possibly might happen over the next decade. what i see happening in oregon manufacturing is a tremendous amount of jobs going overseas. a piece of this is that, where as we envisioned that china coming in wto would create opportunity to increase our manufacturing to sell products to a rising middle class in china, we didn't go into zwickau aggressive china would be in subsidizing their own manufacturing for export that would compete strongly, and it some cases undermined american manufacturing, ranging from the currency to the direct loans, direct grants and subsidized loans to the subsidize utilities, subsidized land and so forth.
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so we have a tremendous number of facilities that shut down in oregon and across the country, about 50,000 factories. combine that with another trend, which is the enhancement in computer control, robots if you will, for building things. i was fascinated to go to a shop that makes knives in oregon, and some cases you have people feeding the blades into the machine, flipping them over and we feed them. other cases you have a mechanical arm, computerized arm that is picking up the blade, grind it in a bunch a bunch of different ways, dropping it into another bucket, no human involved at all. and as that technology becomes cheaper, it poses a fundamental question, which is when you have machines that simply increase productivity by a factor of, say, five, 10% and gradual changes, well then, wages went
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up in post-world war ii period of we experience. but when machine start to completely replace the worker, it fundamentally changes whether or not there are jobs that create living wage opportunity for american families. so combining the loss of jobs to china and the loss of jobs, not just enhancement, the full replacement of workers, poses some fundamental challenges to was in how we are living wage jobs. so i wanted to throw that out there and see if, i realize you were doing kind of more short-term luck, but how this might feed into that longer-term concern. >> senator, as you said, in general, automation has raised productivity in a way that is greatly enhanced most americans standard of living. but it's also true as you note that certain sorts of changes can change the distribution of
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output in a way that may take it away from some people and give it to others, essentially. and, in fact, the leading explanation that economists offer for the widening of the distribution of wages and incomes, much of the income distribution over the past several decades is the shifts in technologies that have benefited certain sorts of people and disadvantaged others. there may be separate expedition for the rise at the very top of the distribution, but those sort of long-term trends pose a very large challenge for public policy. if you're interested in ensuring that the distribution and economic tide happens in a certain way, assuring that certain people can make a living, even if a certain skills they have are no longer demanded by businesses, that's a very difficult problem to address.
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and in addition to the work we do a short-term economic issues we work underway trying to progress long-term economic challenges as well as. congress talks for education and training, u.s. spends a rather small share of its gdp on retraining workers relative to many countries in europe, for example. same time, evidence on the effectiveness of training programs, not all of them work very well, so it's not a magic bullet. and i don't think, i certainly don't have, i don't think the analytic community has to offer you a magic bullet. but that's not to diminish the significance of the trend you were describing. i think they are significant, and as i say, we talked about doing more work in education and training, and that is one direction that one could
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proceed. also, of course one can change tax policy in ways to raise money for certain people and not from others, as you and your colleagues sought to do. there's a various levers but they don't think they are straightforward. >> i have 18 seconds. i'd love to see us help working families purchase homes now when the prices are low, and when interest rates are at historic lows, helping to absorb this huge surplus of housing we have and to empower new generation of homeowners. any thoughts in one second? out of time. >> we have been giving everybody some additional time, senator merkley, so we can, we have been giving everybody a couple minutes over the time. >> thank you, mr. chair. i want to hear your thoughts. >> you raise a very straightforward issue for me,
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senator. in the housing boom, some people ended up being able to borrow money to buy houses that they couldn't sustain ownership of, they couldn't sustain payments on their mortgages. some of that is because of the economic problems and the loss of jobs a loss of income and so on that ensued, but some of that most analysts think was just an excessive exuberance in buying houses and borrowing money. that was just too much of a stretch for some people. so, i think the widespread view that the standards for who will be able to bar how much money against a house will be tougher going forward than they were during the boom years. at the moment they seem to be tougher even than they were some years before the boom and analysts worry about that. and the administration's efforts to work with fannie mae and freddie mac partly to try to ensure that the standards,
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mortgage lending, are not higher now than they were in what looks like the recent stable period before the boom. beyond the passion of the tax code provides considerable incentive for people by subsidizing mortgage interest. there are other policies that you and your colleagues could consider to help homeowners in general, or to help homeowners and he more targeted way. spent i will be real quick in my response to allow my college to get into his questions, but i do think that i would emphasize lastly the exuberance factor and the predatory factor. when ordinary working families went to the originator and the originator was being paid undisclosed the bonuses or kickbacks to steer them into subprime loans, that was a big problem when the originator was filling out the loan amount and, if you will, alone was a liar loan. that was a problem.
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when there was a prepayment penalty that homeowners survey didn't understand because they're trusting their mortgage originator, it meant i couldn't get out of this predatory loan once they signed into without paying a huge share of the valley of the house and how to flush them if you will. that was a huge problem. we have ended all those practices. they should have been allowed in the first place. but i am concerned with throwing the baby out with the bathwater. i would put much of the bubble attributable to the low-cost teaser rates that started in 2003, and you could almost track the growth of the loans with the bubble. and so we do spend about $100 billion a year on interest subsidies. very little of that goes to working families, very little. indeed, because the interest deduction is higher than the cost of ordinary family buying homes. so my argument is, in addition to that, shouldn't we be doing matching down payment grants to enable folks to seize this
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opportunity, working families, whose income still does enable them to buy a house, lower lows and lower interest rates, rather than having these homes sit empty. my argument would become and i would love to get additional cbo analysis, that that little bit of money, two to $3 billion compared to the $100 billion we're spending on mortgage deduction would be very valuable in investment with a huge sense of factors that are reinforcing to our economy in terms of the education of the children, graduation rates from high school, reduced likelihood of being on public assistance, future in life and so forth, a whole series of extra dose the comfortably with homeownership. >> i understand the issue, senator, and i don't think with and lets the policy but certainly we can talk about whether we have the tools to do soap. >> thank you very thoughtful questions, senator merkley. that's good. senator coons.
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>> thank you, mr. chairman, and thank you, director elmendorf. i'm sorry to have missed your testimony earlier. i was in energy committee hearing, and look forward to reading it in full. i'd like to start if i could on a topic that we discussed on the energy committee, a number of times. in may, chairman bingaman and i sent to the congressional budget office into a letter requesting further insight into how cbo views and scores two different instruments. one, energy savings purchase contracts with which i have some experience from my years in the private sector where i help manage and implement those and then the public sector at the canada we don't utilize those to finance energy efficiency investments at the county to level that i was responsible for. and the second long-term power purchase agreement for federal installations as a way to manage some of the long-term costs of deploying a new energy technology, something that i think both omb and the department of defense are looking at more closely.
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i did get a response, my staff got a response in july 2 the first question so i want to thank you for that. and as i understand it, the cbo continues to view e.s.p.s because when entered, omb among others view it as budget neutral becausbecause in the long term contractual it saves the government money. so this may be an example of something that school is that not cost. and i welcome any comments you might have on that. then second, i'm still awaiting a response on the power purchase agreements and welcome any sort of insight you can offer today on that at more than anything i just wanted to signal a persistent enthusiasm working with you, it being november, the letter going and make him i understand there are many, many other pressing than this but happened to be in a state where proceeding a pace to deploy a number of technologies when that might be of some real interest. and it's something that chairman and i have talked about.
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>> so senator, i'm very sorry we didn't respond to the earlier letter of yours completely. i confess that i didn't realize there was an outstanding request but i will be sure when i go back that we are working on it, and i'm sorry it seems to have fallen through the cracks from our point of view. but we will check and see what happens. on the energy-saving purchase contracts, i remember knowing a bit about this when we return to their tls about of the moment. i think i couple of issues here. one is how much my is the government saving on balance it depends on how the contracts are written. and the second issue is you raised, which is how the estimates work, and i think the issue you're referring to is that the contracts themselves count as a cost. savings can be realized that the government later to the extent that appropriations actions reduce the funding to purchase
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power, and for long-standing budgetary rules those things are kept track of separately. but we try in our estimate, there are other cases where there is a versions of that peace does. we try where we can to offer an assessment of what the savings would be, but they recognize in the report, for example, the paygo law refers to mandatory spending not to discretionary appropriations in the same way. that's nothing that we directly control in the overall architecture of the budget from congress' point of view. but we try to provide information so people can see the whole picture. i think we tried to do that in this letter about purchase contracts, again, i'm so i don't remember the details of the. >> someone who is my first year as a relative -- i am trying to sort keep my eye on places where there are, from a broader view, real opportunities for savings, but wherefore budget scoring reasons we don't pursue them.
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and so if i had in these two instances identified something where i can contribute a more detailed conversations about that, i'd be grateful to learn more about it. i am convinced that long-term pdas have an opportunity to improve both purchase price for federal entities, and the deployment of new technologies. two more questions today, if i might, given time limitation. first, on the range of curative effects of policy options that you laid out today, that repeated christian scored particularly low, that your analysis in reducing the tax rate on repatriated income showed a very negligible gain punitive output. i wonder if the repatriation policy were more tightly articulated with mandatory either hiring policies or infrastructure investment, which you predict any great impact on the economy, which continue to score it really at the far low end of potentially beneficial
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undertakes? >> if the policy could be written in a way that it created additional incentive for firms to hide or to invest, then it would have a higher cost effectiveness performance. what i haven't thought about is, these are the countries that have a lot of overseas. as we say in her testimony, have also a lot of assets here in the united states, so they're not in general constrained by not having those funds available. and they are probably doing some hiring and investing anyway, so how one would construct the law to link the lower rate on tax rate repatriation to incremental investment or hiring, i'm not sure. and we could think about and
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also probably would be better to talk our colleagues on the staff of the joint committee on taxation who are poor, much more experience than we do in that sort of issue. but yeah, the reason it gets a little, turns out have such low performance by this measure is we think basically the companies would bring the money back, but doesn't change their decision whether you hire an ex-worker or do extra investment. that link could be forged in a reliable way that would make the policy more effective. >> there is a bill which i believe has been introduced, cosponsored, that attempt to do just that. which i have so far not supported in part out of skepticism are concerned about that mechanism and its effectiveness. there's another effort underway to use the repatriated increase tax revenue to the treasury as a way to prime the vote financing tasha infrastructure bank. my core concern is is there any way given corporate earnings and profits to demonstrate in a reasonable way that those
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repatriated profits are, in fact, deployed meaningfully, which i think it's sort of the core criticism of the previous opportunity? >> i appreciate if you wouldn't mind coming you have already covered this in some detail, just a quick reference to what you might see as the three most likely to be effective economy strengthening fiscal policy measures that you think could command bipartisan support? >> it's that last clause. >> yes, so senator, about the 10,000 most put the knowledge of a person within five miles of this building, so i'm not the person you want to ask about what's politically viable. all we can do is offer our analysis, what we think is more or less effected by this measure them and as we talk about and testament, there are various criteria by which your colleagues can do this. i can't apply a filter of political viability for you. >> let me ask if i could, final
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question on that, recognizing the difficulty trying to identify things that could potentially compel bipartisan support the earlier today senator rubio and i announced the introduction of bill, one of the many features of it is extending, expensing provisions for investment cost for small businesses. that also scores on a very broad range. i may have missed this previous testimony, it's part of the concern about its range of effectiveness, the direction for the link the predictability of the period for an extension. in other words, a one or two year extension accelerate either expensive or depreciation provisions being less effective than the longer-term extension. >> it certainly comes, i would, i guess i would emphasize first in the uncertainty, the state of the business cycle and the low rate of utilization of existing capacity. and lowering the cost investment we think would spur some
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investment, but how much might be limited by the fact that businesses have capital in hand. they are not now using. but it's hard to know how much difference that makes. and analyses of past variation in this sort of provision tax code have reached some varying conclusions about how effective the policy has been. i think this is a case, sort of a policy where short-term can be better than long-term. for many things, one looks a permit change in policy is more effective in altering behavior, but in this case it businesses view this is truly a temporary measure, sort of sale on investment, buying investment goods, for a limited period, that could spur more reaction in the same sense in which a store that has low prices just for this week and might get people in the door this weekend. so that's the temporary nature of it can help to accelerate the business investment spending, people might do extra if this
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provision were in effect. that's complicated by the fact that many times in the past, certainly the last decade, had provisions like this on a number of occasions. so, it is less of i think probably viewed less as a one time thing, and more as part of the ever evolving nature of our tax code. it's also harder for us to judge of businesses will assess its temporary or permanent nests and thus how much effect it would have on the rest of their spending but i think the uncertainty we have is not easily accessible in particular changes in the provision that just reflects the difficulty judging how businesses would respond under the circumstances, any sort of proposal. >> thank you. thank you for your testimony. >> excellent questions. thank you for your answers, director elmendorf. just on repatriation, i want to say there's not much of a mystery, i don't believe them because we have done it. we can now go back and look at what happened.
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and it's very, very clear what happened. the 15 companies that were the biggest repatriated were pharmaceutical, tobacco, technology and soda companies. those corporations that accounted for more than half of all the earnings repatriated reduce their u.s. workforce by 21,000 jobs after the tax break that was predicated on been creating more jobs in this economy. what they did do, they didn't hire people, they laid off people. what they did do is accelerated stock buybacks. the increased executive pay 30% a year between 2004-2006. and interestingly enough, they
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accumulated offshore funds at a faster rate than before the tax break. so, i just say to my colleagues who are kind of intrigued with this idea, corporations that use offshore tax havens get the largest benefit. after the 2004 tax break, a substantial share of the repatriated funds came from tax havens. boy, is that a surprise? i'll tell you, we get in the habit of repeating these repatriation gimmicks every few years, what incentive does that provide companies? about as clear as it can be. that is a huge incentive to take jobs overseas. take jobs overseas, safe and secure in the knowledge that
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congress will answer the siren song to allow these repatriation holidays, bring the money back at a fraction of the normal tax rate. they are talking as low as 5%, my .25%, instead of the statutory rate of 35%. -- 5.25%. they can convince congress, if you can allow this one time, maybe we'll do it again in just a few years, and we will bring this money back at a fraction of the normal tax rate, just in time to lay off some more people and increased executive pay and have some more stock buybacks. my goodness. i mean, fool me once, fool me once, fool me twice, fool me three times. you know, at some point shame on us. for a by the siren song. but for all the things i've
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seen, and by the way, we talk about being increased, being worried about the deficit, joint committee on taxation said it will cost the treasury $79 billion over 10 years. so, it adds to the deficit, adds to the debt, the companies that repatriate i very concentrated tax haven countries, and they bring the money back and lay off people. there's a brilliant scheme. add to the debt, have a further job loss, create an additional incentive for companies to move jobs overseas so they can set themselves up for the next repatriation holiday, in which the comeback you're at a fraction of the normal tax rate. my goodness. i hope we don't fall for that one again. i thank the director. >> thank you, mr. chairman.
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[inaudible conversations] [inaudible conversations] [inaudible conversations] >> the u.s. senate is in recess for the weekly party lunch meeting, they will be returning in about five minutes at 3:00.
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>> here's a look at kcci tvs news coverage of the former house speaker. >> we are 50 days away from the iowa caucuses and a new poll shows a new pair of front runners in the republican race for president spent last week poll showed herman cain and mitt romney leading the pack but today, it appears that romney and mccain which are neck and neck. gingrich is hoping to cash in on that momentum and i'll. laura nichols caught up with a king which des moines and talk with him about his newfound leading status.
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>> gingrich laugh today. he says he knows just as well as anyone else that this race is volatile and poll results change all the time. >> it's not everyday presidential candidate shows up in your office cafeteria. on monday, not the typical lunch are, guide went insurance employees got a chance to chat and take pictures with newt gingrich. >> we need iowa citizens to get bigger because we're going to make washington bureaucrats smaller. that's what i ask you to be with me. >> the former speaker of the house has seen a recent surge in popularity. the latest cnn poll places and neck and neck with mitt romney. when asked about it, he joked about his newfound rise in the polls. >> is better than when i was at four. look, this is the most volatile race in my lifetime. who knows what the polls will be too much from the? i'm not going to tell you that
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i'm on the way. >> kcci political analysts agreed as an gingrich could just be a new flavor of the month. >> republicans are still desperately looking for an alternative to mitt romney. many of the other candidates have their moment in the sun, and why not gingrich at this point it was gingrich has had to overcome some major obstacles. back in may he lost major support after saying this on "meet the press." >> i don't think right wing socialism is any more desirable than left wing socialism. >> the next day during a trip to iowa gingrich got an earful. >> you're an embarrassment to our party. why don't you get out before you make a bigger fool of yourself? >> then in june his entire iowa staff quit tax-and-spend has had to revamp his campaign relying heavily on volunteers. is also made a push to spend more time in iowa and will soon open a campaign headquarters in des moines and iowa city. >> we got off track for a while but i think we are back where we
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are going. will have a series of announcements this week and next week. >> he also headed to jefferson and carol today. he will be in iowa through wednesday and back again on saturday for the family leaders thanksgiving family forum in des moines. laura nichols live in the newsroom. >> even if gingrich wins the republican nomination, the same poll shows voters still prefer president barack obama by 38-point margin. after the top for republican candidates in this poll, only romney leads obama as their preferred choice. >> see more videos of the candidates at c-span's website for campaign 2012 from recent events to the earliest parts of their campaigns. read the latest comes from candidates and political reporters from social media sites and link to c-span's media partners in the early primary caucus states, iowa, new hampshire and south carolina. all at >> the u.s. senate will gavel
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back in in just a couple of minutes. senators will be returning from their weekly party lunch meeting. legislative business this afternoon includes more debate on federal spending. the senate coming back in in just a moment here. live coverage here on c-span2.
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the presiding officer: the senator from new jersey is recognized. mr. menendez: i observe the absence of a quorum. the presiding officer: the clerk will call the roll. quorum call: officer: the
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majority leader is recognized. mr. reid: i ask unanimous consent the call of the quorum be terminated. the presiding officer: without objection. under the previous order the senate will resume consideration of h.r. 2354 which the clerk will report. the clerk: calendar number 157, h.r. 2354, an act making appropriations for energy and water development and related agencies for the fiscal year ending september 30, 2012, and for other purposes. mr. reid: mr. president, i've been authorized by the chairman of the senate appropriations committee to withdraw the committee-reported substitute amendment. the presiding officer: the amendment is withdrawn. mr. reid: ta*u, mr. president. i have -- thank you, mr. president. i have a substitute amendment at the desk. the presiding officer: the clerk will report. the clerk: the senator from nevada, mr. reid, proposes amendment 596 -- 956. add the following division a, energy related agencies --
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mr. reid: i ask further reading be waived, mr. president. the presiding officer: without objection. mr. menendez: mr. president? the presiding officer: the senator from new jersey is recognized. mr. menendez: mr. president, i rise to raise concerns about this amendment that would constitute a significant change to u.s. foreign and banking policies that should be carefully considered by the senate foreign relations committee and the senate banking committee. these provisions have far-reaching policy implications which make their inclusion unsupported. this amendment would allow cuba to become the only country on the state department's state-sponsored terrorism list to have direct access to u.s.-based financial institutions. it would allow a country that does not subscribe to basic principles of money laundering and counterterrorism to make direct transfers to u.s. financial institutions. and all of this at the same time making concessions to the regime when a united states citizen,
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alan gross, remains a hostage in u.s. prisons. his crime working to enhance the ability of the island's ability to communicate with the world. it comes when there has been a crackdown on peaceful activists like the ladies in white who take to walking in the streets every sunday to protest the political imprisonments of husbands, brothers and sons. the message we should be sending to regimes whether in cuba, syria or iran is that they are pariahs, their blood money has no place in our economy. the kurpbs of free -- currency of freedom prevails over oppression. therefore my colleague, the senator from florida, senator rubio, raise a rule 16 point of order against the pending substitute amendment. mr. nelson: mr. president, would the senator yield. the presiding officer: the point of order is well taken and the amendment falls. mr. reid: mr. president,
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without my losing the floor, i yield three minutes to the senator from florida, mr. nelson. the presiding officer: the senator from florida. mr. nelson: i thank the majority leader. and i won't take the three minutes, just to say my objection is the same as the senator from new jersey and my colleague from florida, senator rubio. the fact is that the provision in the bill would allow direct payments between u.s. sellers and cuban buyers of agricultural goods. and under the existing restrictions, u.s. exports to cuba have fallen dramatically in the last few years largely due to the regime's shortage of hard currency. in other words, the sanctions are working and now is not the time to relax u.s. economic sanctions, particularly while we see in this planet earth of 2011
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a repressive regime like is the one there in cuba and the one that continues to hold alan gross. mr. reid: mr. president? the presiding officer: the majority leader. mr. reid: without my losing the floor, i would yield three minutes to the senator from florida, senator rubio. the presiding officer: the senator from florida. mr. rubio: i want to thank the majority leader for that. i'll be brief. i think my colleagues touched upon it and the public policy behind it. in all the things that are happening around the world that are very important, i think we remind ourselves a few miles off the united states, the most repressive government in the western hemisphere conducts its business and is able to fund it through a lot of interaction as we -- interaction as we is speak between the united states and cuba. i know these are folks that are in business and not doing it with bad intentions but the practical implications is hard currency. at a time when we seem -- have
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seen more repression this year than in recent years as the castro government continues to fear it is losing its grip on power and influence on its own society. i would just say that i'm supportive of what senator menendez is trying to do and i urge our colleagues to keep a watchful eye on cuba. mr. reid: mr. president? the presiding officer: the majority leader. mr. reid: i would ask consent that the full statement of my friend from new jersey be made part of the record. the presiding officer: without objection. mr. reid: mr. president, let me take a moment to explain just -- explain what's happened. i offered a substitute amendment that included the versions of the energy and water financial services statement foreign ops appropriations bills. the senate appropriations committee on a bipartisan basis reported. senator menendez raced a point of order -- raised a point of order against the substitute amendment. he had a right to do that. he objects to the provisions of
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the committee reported financial services bill that relates to cuba. that has been underscored by my friend, senator bill nelson of florida, and my friend marco rubio from florida. the amendment that i just offered is exactly the same as my last substitute amendment, the last minibus, except that does not include the cuba-related provisions which senator menendez objects to. it deletes 620 and 624, the financial services bill reported to the senate. i hope this amendment can give us the basis to move forward on this bill. so, mr. president, i have a substitute amendment at the desk. the presiding officer: the clerk will report. the clerk: the senator from nevada, mr. reid, proposes an amendment numbered 957. mr. reid: i ask further reading of the amendment be waived. the presiding officer: without objection. mr. reid: i ask unanimous consent that amendment number 957 which consists of the text of the withdrawn committee
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amendment, the text of s. 1573 with the exceptions of sections 620 and 624 to which i just referred. calendar number 171 as division b and the text of s. 1601, calendar number 179 as division c, provided further that h.r. 2434 as reported by the house appropriations committee and division c of amendment number 957 be deemed house-passed text in h.r. 2354 for purposes of rule 16. finally, that amendment number 957 for the purposes of paragraph 1 of the rule 16 be considered a committee amendment. the presiding officer: is there objection? the senator from kansas. mr. moran: mr. president, thank you. i'm a member of the appropriations committee and a member of the, in fact, the ranking minority member of the financial service subcommittee. the amendment that the majority leader offered that excluded the provision related to cuba was an amendment that was adopted by
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that full appropriations committee in a very bipartisan way. in fact, the vote was two-thirds to one-third. 20 votes in favor, 10 votes again. the provision that has been struck by the procedure that occurred today is the final implementation of legislation passed by this congress in 2001 in which we provided for the first time the sale for cash up front of agriculture commodities, food and medicine. it's always been my view that when we fail to sell agriculture commodities to cuba, we only harm ourselves. the amendment that has again through this process been eliminated from consideration today would implement the ability for money to be transferred to the united states by a cuban bank for purposes of paying for that sale up front. and, mr. president, we have worked closely with the
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administration with the treasury department to make certain that nothing contained or nothing that would be contained in this provision would be objectionable to the security over the financial safety and soundness of our country. and so, mr. president, the process that has occurred, while there could have been many rule 16 points of order made today, one was made that defeats the will of the majority of our committee, and i do object. mr. reid: mr. president? the presiding officer: objection is heard. the majority leader. mr. reid: mr. president, i have a full statement that i want to give as to why i'm going to move the next process. i understand my friend from louisiana is here. i'll be happy at the appropriate time to yield to him to make a statement. but right now i have to ask for the yeas and nays on the substitute. the presiding officer: is there a sufficient second?
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the majority leader. mr. reid: mr. president, without my right to lose the floor, i yield to my friend from louisiana for three minutes. the presiding officer: the senator from louisiana. mr. vitter: i thank the majority leader. i also rise to object to the motion in question for completely different reasons than my colleague from kansas. i rise to object, and several join me in this view, because i believe these additional appropriations bill which are trying to be brought to the floor simply spend too much money. mr. president, our greatest challenge as a nation right now is our economy, and a big part of that challenge is the fact that we have completely unsustainable federal spending and deficit and debt. and yet, mr. president, in the midst of all that, these appropriations bill spend more
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money than we're spending already, not less. mr. president, every american with common sense knows that when you're in a deep, deep hole, step one is to stop digging. we as a country are in a deep, deep fiscal hole, but these bills have us continuing to dig further. these bills, three bills that the majority leader wants to bring to the floor together spend $6 billion more than we're spending now. we're spending more and not less, even though we're $15 trillion in debt. mr. president, that's simply continuing to dig when we're in a deep, deep fiscal hole. also, mr. president, when you look at some of the details of this spending, it makes it even more offensive to millions upon millions of americans. allowing funds for overseas groups that perform abortion,
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allowing taxpayer-funded abortion in the district of columbia, allowing elective abortions in the federal employee health benefit program, allowing funding of abortion by the peace corps, and $40 million for the u.n. population fund deeply involved in china's pro-abortion population control program. so, mr. president, i think it's a deadly combination in more ways than one. we're continuing to dig when we're already in a deep hole. and then when you look at the details of the spending, so many parts of that in and of themselves are deeply offensive to tens of millions of americans. and based on that, mr. president, and joined by many conservative colleagues of the senate, i also object. and i yield the floor. mr. reid: mr. president? the presiding officer: the majority leader. mr. reid: mr. president, the
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bills that we brought before the senate -- energy and water, financial services, foreign operations -- are all within the agreement that we made in july, the deficit-reduction package, the debt ceiling package that we passed. it passed the senate, passed the house, signed by the president. my friend from louisiana is trying to renegotiate something that was passed after three months work that we did on it. i regret that there has been an objection to my request, but what i just sought was the same understanding we had in the last appropriation measure which worked pretty well. we pass those three bills. the conference should be completed momentarily. we will have to vote on that this coming week, and included in that is the c.r. to fund the government until sometime in the middle of december. but there has been an objection to proceeding along those same lines. everything that was raised by my friend from louisiana, that's what the amendment process is
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all about. but we wanted it to be like we have done in the past, that these appropriation matters, the amendments would have to be germane, but he was unwilling to live by that standard for amendments that had nothing to do with the underlying bill. that's what the american people can't stand. the senate has rules that govern appropriation measures. these senate rules are necessary because appropriation matters are must-pass bills. and we need some rules to prevent them from coming christmas trees. the senate rules thus prevent nongermane amendments. the senate rules prevent legislating on appropriation bills. so those two things have the protection only on appropriation bills. if we didn't have these rules, these appropriation measures would become unmanageable. so what i sought with my unanimous consent request was to create an environment where the regular rules of the senate could be in effect. regrettably, we didn't get that
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agreement. if we did those bills individually, mr. president, that's automatic. without such an agreement, though, we have another thing about which we have to worry. funding for the government runs out at the end of this week, so before we leave this week, the senate needs to pass the continuing resolution contained in the conference report on the agricultural appropriation bill which also included other appropriation matters. we can't allow the senate to get tied up in knots in a way that would prevent us from getting that work done. as i said this morning, i have made a commitment to senators levin and mccain that we're going to move to the authorization bill as soon as we finish this appropriation package. i intend to do that. so we'll engage in further discussions about how we can move forward with these important measures. in the meantime, we need to take steps to at least temporarily hold matters where they are. so there, mr. president, as i indicated i had pending the yeas and nays on the substitute. the presiding officer: is there a sufficient second?
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there is a sufficient second. the yeas and nays are ordered. mr. reid: thank you. i have a first-degree amendment which is perfecting in nature at the desk. the presiding officer: the clerk will report the amendment. the clerk: the senator from nevada, mr. reid, proposes amendment number 958 to amendment number 957. mr. reid: i ask for the yeas and nays on that amendment. the presiding officer: is there a sufficient second? there appears to be. the yeas and nays are ordered. mr. reid: i have a second-degree amendment at the desk. the presiding officer: the clerk will report the amendment. the clerk: the senator from nevada, mr. reid, proposes amendment number 959 to amendment number 958. mr. reid: i have an amendment at the desk to the language proposed to be stricken. pyrite the clerk will report the amendment. the clerk: the senator from nevada, mr. reid, proposes amendment numbered 960 to the language proposed to be stricken by amendment numbered 957. mr. reid: i ask for the yeas and nays on that amendment. the presiding officer: is there a sufficient second? there appears to be. the yeas and nays are ordered.
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mr. reid: i have a second-degree amendment at the desk. the presiding officer: the clerk will report the second-degree amendment. the clerk: the senator from nevada, mr. reid, anticipates amendment numbered 961 to amendment number 960. mr. reid: i have a motion to recommit the bill with instructions. that is also at the desk. the presiding officer: the clerk will report the motion. the clerk: the senator from nevada, mr. reid, moves to recommit the bill h.r. 2354 to the committee on appropriations with instructions to report back forthwith with amendment numbered 962. mr. reid: i ask for the yeas and nays on that motion. the presiding officer: is there a sufficient second? there appears to be a sufficient second. the yeas and nays are ordered. mr. reid: i have an amendment to the instruction at the desk. the presiding officer: the clerk will report. the clerk: the senator from nevada, mr. reid, proposes amendment numbered 963 to the instructions of 962 of the motion to recommit h.r. 2354. mr. reid: i ask for the yeas and nays. the presiding officer: is there a sufficient second? there appears to be. the yeas and nays are ordered. mr. reid: i have a second-degree
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amendment at the desk. the presiding officer: the clerk will report. the clerk: the senator from nevada, mr. reid, proposes amendment numbered 964 to amendment numbered 963. mr. reid: mr. president. we -- i indicated during the last week that i did not want to have to fill the tree on this. it's unfortunate that an objection was raised. we were able to move forward, as i indicated, in the last so-called minibus with three appropriation bills made into one, so we're now in a situation where we have no way to move forward unless we have an agreement on the underlying bill which is the energy and water bill. now, i have some knowledge of that bill. i have been on that -- i was on the appropriations committee from the day i got to the senate, and i have worked on that subcommittee for many, many years, several decades, and i was chairman of that
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subcommittee quite a few times. i worked with senator domenici, when we go back and forth as to who was in the chair, we work extremely well together. we get the bill done very quickly and satisfy the needs of the members of this body. if i can have the efforts of my friends, senator feinstein, senator alexander to move forward on this in a way that we can have some view of how we can end this legislation fairly quickly with the ability to have amendments, i would have no problem because, as i have indicated, we have a lot of things to do before we leave here. we cannot come back here in december with a lot of unfinished business. i talked to my caucus today about the defense authorization bill. i think we have to finish that bill before we leave here for thanksgiving, and so we have got the minibus conference report, we have this now energy and
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water appropriation bill which i believe in and is so important, and we have of course the defense authorization bill. so i say to everyone here if we can work something out, good, i hope we can. a senator: mr. president. the presiding officer: the senator from tennessee is recognized. mr. alexander: i wonder if i might respond through the chair to the majority leader. i have been consulting with the chairman of our committee. on the republican side, we understand what the majority leader is saying. what i hear him saying is we have some important work that we have to do this week. he wants to move to the defense authorization bill before the end of the week. we have a conference report that includes a continuing resolution. he wants that acted on before the end of the week. what our hope is is that we can deal with the energy and water bill today and tomorrow, and i am beginning to ask our republican senators, and senator feinstein can speak for herself but she is doing the same with democratic members and asking them to get their proposed amendments to the floor this afternoon if at all possible so we can give the majority leader
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some idea of how many amendments there might be so he can evaluate how to proceed. so we're going to -- we appreciate the opportunity to do that. we believe that doing the appropriations bill is the basic work of the senate. this is important both from a defense and a nondefense point of view. it had broad support in our committee, and so far i have not found anyone on our side who isn't agreeable to moving quickly on it. now, i will know more at the end of the afternoon, and i will report to the majority leader about the republican side, and i ask my colleagues who are listening to please bring their amendments to the floor this afternoon as soon as possible. mr. reid: i have absolute confidence in the chairman of the subcommittee and the ranking member. they are two of our finest. they have a reputation here of working to get things done on a bipartisan basis, and that's certainly necessary in this most important piece of legislation.
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mrs. feinstein: mr. president. the presiding officer: the senator from california is recognized. mrs. feinstein: mr. president, if i understand this correctly, it is as senator alexander has stated, and that the effort is to under a germane rule have the energy and water appropriations bill brought to the floor. if that is achieved, then all members, including amendment members, should get their amendments to the floor as soon as possible. we know what this week is like. we know the defense authorization bill has to come to the floor. we know there are other items that have to come to the floor this week. and so therefore i hope this effort is successful and that we are able to begin to work on our
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bill. senator alexander. mr. alexander: i thank the chairman. mr. president, that's exactly right. just so senators know, senator reid has filled the tree, but what we hope to persuade him is that we know the number of amendments that we have and that he doesn't need to do that. he is perfectly able to withdraw that, and i know that several of our republican colleagues are discussing this afternoon how many amendments they want to offer, and it's my hope that we will be able to soon be able to start voting on those amendments, vote on them tomorrow, finish the bill sometime tomorrow. mrs. feinstein: mr. president, i note the absence of a quorum. the presiding officer: the clerk will call the roll. quorum call: california is
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recognized. mrs. feinstein: mr. president, i ask unanimous consent to leave the bill and to speak briefly on morning business. the presiding officer: the senate is still in a quorum call. mrs. feinstein: i ask the quorum call be suspended. the presiding officer: without objection.
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mrs. feinstein: thank you very much, mr. president. mr. president, i rise to remember the life and to honor the legacy of a remarkable woman, an advocate for breast cancer research and awareness, a philanthropist, a savvy businesswoman, an accomplished photographer and author, a wife, a mother, a grandmother and a dear friend, evelyn lauder. evelyn lost her courageous battle with ovarian cancer on saturday. she is survived by her husband of 52 years, leonard lauder, her sons william and gary, and five grandchildren. in many ways, her life parallels the familiar immigrant story of 20th century america. it's the story of a woman who escaped nazi europe, voyaged to the united states of america and proceeded to enrich this country in countless ways. evelyn hauser was born on august 12, 1936, in vienna. she was the only child of
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earnest and mimi hauser. when hitler annexed austria in 1938, the family fled to belgium with just a few sentimental belongings. later, the family relocated to england during the blitz. in england, evelyn's mother was sent to an internment camp on the isle of man. evelyn was sent to live in a nursery. eventually, the family was reunited. in 1940, they set sail for new york city. evelyn often told a story about arriving in new york harbor at the dawn of the second world war. she said, and i quote -- "my mother woke me up really early in the morning to see the statue of liberty. that's a sight i'll remember all my life." she fell in love with new york that morning and would give back to her adopted city for the next seven decades. she was a proud product of the new york city public school system. as a freshman at hutter college,
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she met her future husband on a blind date. leonard lauder was the son of estee and joseph lauder, the owners of what was then a small family cosmetics business. evelyn was a public school teacher for several years, and in 1959, she formally joined estee lauder, pitching in wherever she was needed. as the company grew to become an international conglomerate, so, too, did evelyn's role and influence. she held many different positions at the company over the years. one of the earliest projects she tackled was to create the company's training programs. she enhanced the estee lauder product lineup by adding new colors and products that appealed to a range of complexions and skin types. she had great instincts about new trends, about the needs of a consumer, about the development of skin care and cosmetics. in fact, it was evelyn who
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helped launch the name "the clinique brand." in the last few years, she focused on fragrance, a love she shared with her mother-in-law that stemmed from the love of flowers and gardening. in 1999 and 2007, she was recognized as new york's 100 most influential women in business by crane's new york business. evelyn was diagnosed with breast cancer in 1989 and became an advocate for women's health. true to form, she was reluctant to publicly discuss her own condition. my situation doesn't really matter, she told a reporter in 1995. instead, she chose to channel her energy and attention into helping raise money and educate women with less access and information about the disease.
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in 1989 as a member of the board of overseers at sloan cettering cancer center in new york, she initiated a fundraising drive that raised more than $18 million to establish the evelyn h. lauder breast center. the country's first ever breast and diagnostic center. the center opened in 1992 sand a model for similar facilities around the world. in 1992, evelyn devoted the -- excuse me, developed the iconic pink ribbon which we all know today as the worldwide symbol of breast health. she spearheaded the distribution of millions of pink ribbons and breast self-exam instruction cards at estee lauder cosmetic counters all across the country. her efforts elevated breast cancer awareness in the public
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consciouses? --, consciousness, and almost two decades later more than 115 million pink ribbons and millions of educational brochures and bookmarks have been handed out around the world. in 1993, she turned her attention to supporting the world's leading medical and scientific researchers, and established the breast cancer research foundation to address the crucial lack of breast cancer research funding. under her leadership, the foundation has grown to become the largest national organization dedicated exclusively to funding research relating to the causes, treatment, and prevention of breast cancer. to date, this foundation has raised $350 million and supports 186 researchers around the united states, canada, latin
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america, europe, the middle east, australia, and china. in 2000, evelyn lauder launched the annual global landmark ill new mexico nations initiative. we've all enjoyed seeing historic landmarks illuminated in pink lights during the month of october. each year more than 200 prominent landmarks around the world participate. evelyn has bathed the empire state building, niagara falls, the leaning power of pisa and the tokyo tower in pink lights. there was another side to evelyn. she was an accomplished photographer with a keen eye and ability to capture extraordinary images. i have two of her photographs and treasure them. her photography included rainbows rising from the pacific ocean, snow scenes in colorado, pattern created by
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light reflecting on water, landscapes in chile, tuscany and the south of france among others. evelyn's work was featured in exhibitions at art galleries in london, paris, jerusalem, barcelona, and beijing, and well-received exhibitions in new york, los angeles, seattle, and my hometown of san francisco. she also accomplished two books of photographs and had her work featured in many publications, including "american photo" "house and garden" "the oprah magazine," and "town and country" evelyn donated all freeze her photographic exhibitions and royalties from her books to the better than -- to the better than research foundation.
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evelyn was a beautiful woman. i knew her. i remember evelyn, her husband, my husband, and i sitting around a small table the a small italian restaurant in new york city and i looked across that table at this beautiful woman, and all that she has done in her lifetime, it is truly amazing. her life may have begun under challenging circumstances, but she became one of the country's most generous philanthropists and accomplished businesswomen. she was fun, she was smart, she was talented. she was a devoted wife, mother, grandmother, and friend. she was a remarkable american woman. and she will be missed. thank you, mr. president. i yield the floor. mr. president, i note the absence of a quorum. the presiding officer: the clerk will call the roll.
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mr. alexander: mr. president.
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the presiding officer: the senator from sten recognized. mr. alexander: i ask that the quorum call be vitiated. the presiding officer: without objection. mr. alexander: i ask to speak as if in morning business. the presiding officer: without objection. mr. alexander: mr. president, last week the senator from wyoming, mr. endsy and the democratic whip introduced a piece of legislation which is called the marketplace fairness act and in doing so, i think they've solved a problem that has persisted at almost every state in the union, and that congress has had a difficult time dealing with for the last 14 or 15 years. and that is the problem of what do we do about state sales taxes , which everybody owes every time they make a purchase -- i mean if you buy a television set at the local appliance store, you owe new
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mexico sales tax or tennessee sales tax and if you buy it from amazon and you live in new mexico or tennessee, you owe the sales tax. the difference has been that the local retailer is required to collect it, and does, and sends it to the state but the online vendor, let's say am sphwhron, is not required to -- amazon, is not required to collect it and so doesn't. like most individuals, i bought a television set from amazon earlier this year. i would need at the end of the year file a form with the state government, say i bought it, i owe the sales tax but the truth is most americans don't do that. and that's a $23 billion-a-year tax avoidance, a great, big tax loophole. and one may ask, well, why has that not -- that loophole been closed? we talk a lot about loopholes around here.
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we know states would like to have dollars right now, either to lower taxes or pay for services. and most of us think that we shouldn't prefer one business over another business or one taxpayer over another taxpayer. and the problem is that the supreme court 20 years ago said that the technology didn't exist 20 years ago to make it easy for on-line vendors to collect the sales tax in the same way the local shoe store or local vendor collects it. and so it would be an undue burden on interstate commerce. so for 20 years, there's been this great, big loophole. now, here -- here's the loophole in practical terms. i called the owner of the nashville boot company last week after we introduced the bill, frank harwell. and at the beginning, he sold everything. he sold cowboy boots on-line. i think it's the nashville
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cowboy boot company. but he sold boots on-line. and he said he sold as much as $400,000 a year of cowboy boots on-line. that was his major business. but then he said, he began -- he was about the only one doing that. and i assume if you wanted bow boy boots, nashville sounded like a good place to buy them so he was doing all right. now he said there are about 200 people selling boots on-line so he does most of his boos selling out of his -- boot selling out of his store. he has a store at bellmeade plaza, right near where i take my granddaughter to breakfast on saturday morning. but he said this is what happens to him. he said people expwiewm the nashville -- come in to the nashville boot store and try on the boots but they go home and buy the boots on-line because they don't have to pay sales tax. now, they are supposed to collect the sales tax but many
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vendors fail to pay it. the senate had a big debate last year. i was right in the middle of it. by the time we got through with it we had a compromise and we put a moratorium on internet access tax so there's no such thing right now as an internet tax. we're not talking about an internet tax. we're not talking about a new tax. we're talking about the -- a plain, old state sales tax that everybody except in five states -- one of them being new hampshire -, which doesn't havea sales tax and 95 -- and 45 -- and in 45 states, that is owed. now, i've been very pleased with the reception that i've heard to the bill by senator enzi and senator durbin. it has five republican cosponsors. i'm one of them. it has five democratic cosponsors. we hope there will be more. manufacture the people who saw problems with -- many of the people who saw problems with earlier attempts to fix the bill believe this
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legislation solves the problem. some of the early bills were large. this bill is ten pages. it's very simple. if the problem was it was too complicated for amazon to collect the on-line tax, they fix that because they've said, well, tennessee, if it wants to require amazon to do the same thing that the local boot company does, it has provided amazon with software that will make it simple for amazon to collect the tax. when i want to know the weather in my hometown and outside maryville, tennessee, i simply put in "weather" and the zip code "37886," back comes the information. that's all an on-line vend ler have to do now. -- vendor will have to do now. it will just put in lamar alexander, cowboy boots, whatever they cost, the zip code and the computer software will figure out the local sales tax and report it to the vendor and the vendor once a quarter will
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send the money electronically to whatever state. so the old problems don't exist. you don't have to sort out many different taxing districts. there has to be one rate for each state, up to the state to figure it up, up to the state to figure out the software. there can only be one state audit. it's -- it's asiy as -- it's asiy as looking up the weather on google or whatever other search engine you use. that will be how easy it is. and the only reason why the supreme court said the states couldn't require on-line vendors to do the same thing that local vendors do was because of the burden on interstate commerce. now, i saw an article in the "wall street journal" today which i thought was very well-balanced. it takes a whole page. states require on-line retailers to collect sales tax. yes, it's fair, no protects small firms. i'm not going to put this in the record but i -- i do want to take issue with one -- one
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argument among those who said, no, protect small firms. two arguments, really. one, the enzi-durbin legislation ahas a $500,000 exemption. so my friend in nashville who was the only -- and i guess for awhile the leading seller of cowboy boots on-line, never made more than $400,000 in revenues. he said i could tell that. so if he doesn't have more than $500,000 in revenue, he's not even affected by this legislation that gives states the option to decide what to do. second, this says that the legislation would overturn the supreme court ruling of 20 years ago. that's not accurate. it doesn't overturn anything. what the supreme court said 20 years ago was that at the state of technology that existed with lack of -- with so many different taxing jurisdictions, it was an undue burden on intersenate commerce for states to require on-line sellers to
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collect the taxes owed. but this is what the court said -- quote -- "this aspect of our decision is made easier by the fact that the underlying issue is not only one that congress may be better qualified to resolve but also one that congress has the ultimate power to resolve. no matter how we evaluate the burdens that use taxes impose on interstate commerce, congress remains free to disagree with our conclusions." and then it said, "accordingly, congress is now free to decide whether, when and to what extent the states may burden interstate mail-order concerns with the duty to collect use taxes." so this isn't overturning anything. it's simply saying -- it's simply responding to the invitation by the supreme court 20 years ago that said, as we look at it, this is too big a burden. that was back when there were thousands of taxing districts and no easy way to collect the money. but it does say that congress had the right to decide what
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represents a burden. and what this bill says is there are two ways the states may do this. there's the streamlining that about half the states have joined together and said, we'll -- we'll create a single way to allow on-line vendors to operate, or the state of kentucky may say, we don't like what they're doing, we'll create our own way. and as long as it's a single way, a single rate, a single audit and the state providers the soft way, the vendor can -- can do it. that is why amazon decided last week that it wanted the enzi-durbin bill. it's been probably the leading opponent of the bill. and on the republican or conservative side there, have been a lot of people who said wait, this -- this is about taxes. well, it's about taxes but it's about taxes in a way that conservatives like to talk about. we like to say, we don't like it when the government policy prefers some taxpayers over others, some businesses over
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others. we also on this side of the aisle really believe in states' rights, and this bill doesn't decide anything, it simply empowers states to make their own decisions about taxes. and in our state, for example, we have one of the lowest tax burdens but we have the highest state sales tax. if we're able to collect $300 million, $400 million, $500 million in tennessee from this tax that's now avoided because of the loophole, i'm sure there will be proposals to reduce the sales tax rate or to reduce some other tax. and certainly the money will help to avoid the arrival of a state income tax, which is about the most hated word in our tax vocabulary in tennessee. so i'd like to introduce into the "congressional record" some of the -- some of the responses that have come just since last week. the memphis commercial appeal editorial, which urged that congress close this
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long-standing loophole in the current tax law. it's the right thing to do. greg johnson, a conservative columnist in the "knoxville new sentinel," said, "on-line sales tax bill would level the playing field." his article refers to the fact that ten years ago, william f. buckley jr., whom he calls the father of modern conservatism, opined in the "national review" about this problem and that it needed a result. the same kind of ar iewment was made by -- argument was made by al cardin, the heftd american conservative union, who wrote an article last week that said this needs to be fixed and supports an -- a bill like the one we introduced. and an editorial from the "st. louis "post-intelligencer,"" an editorial from the denver post and one from "bellview" in illinois. all of them make the same point. this is a states' right issue. it's about allowing states to close a loophole, a tax
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loophole. it is about stopping the subsidization of taxpayers of other taxpayers, stopping the subsidization of some businesses over others. about the only ones left who are complaining are the taxpayers and the businesses who enjoy being subsidized by other taxpayers and other businesses and that, in our opinion, isn't the correct tax policy. i'm very pleased with the work of senator enzi, senator durbin and i'll conclude where i started. i think they have solved the problem. and as more senators look at the fairness of the marketplace fairness act and look at the options it gives each state, i hope we have more cosponsors. and if i were running an on-line retailer in this country, i would begin to make my plans to collect the sales taxes that are already owed and return them to the states from which they're collected, because it's the law and states will have the right under this to do it and more and more on-line vendors are making
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voluntary agreements with states to collect these taxes that are already owed. i thank the president and i yield the floor. mr. alexander: i suggest the absence of a quorum. the presiding officer: the clerk will call the roll.?
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the presiding officer: the senator from vermont. mr. leahy: madam president, i ask consent the call of the quorum be dispensed with. the presiding officer: without objection. mr. leahy: madam president, i've mentioned this to the distinguished republican floor leader, and i would ask consent that i be allowed to speak for a few minutes as in morning business. the presiding officer: without objection. mr. leahy: madam president, at some point i hope we'll bring up the state and foreign operations subcommittee's appropriations bill. the reason i say that, it has a key national security -- has several key national security components. let me mention a couple of the national security programs that
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it supports. it supports our nation's counterterrorism strategy in south asia, the horn of africa and the far east. it responds to turbulent events in the middle east, north africa, even threats on the mexican border. it combats transnational crime, piracy of intellectual property and the denial of fundamental freedom. it promotes access for u.s. companies to foreign markets. very importantly, it operates to secure our pwaepl seus and our -- embassies and counsellates that serve millions of americans while working overseas. it preserves u.s. interests in key organizations and alliances and responds to a massive familiar men in somalia, floods and other humanitarian disasters. and what we've had to do is do this and much more with a budget
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allocation that is $6 million below the president's request. i worry, madam president, that foreign aid today is a term often maligned and misunderstood. it is viewed by many as a form of charity or a luxury we could do without or that might be a sizable part of the federal budget. it's none of these things. as that list i've just talked about illustrates. these have never been democrat or republican issues. the funds in this bill determine whether the united states would be the global leader it has been since the second world war. six weeks ago former president george w. bush said one of the lessons of september 11 is that what happens overseas matters here at home. we face an enemy that can only recruit when they find hopeless people. and there is nothing more
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hopeless to ao child who loses a mom or dad to aids, who then watches the wealthy nations of the world sit back and do nothing. former president bush is right. in fact, his former secretary of state condoleezza rice was equally blunt about the stakes involved. she said we don't have the option to retire, take a sabbatical from leadership in the international community in the world. if we do, one of two things will happen. there will be chaos because without leadership there will be chaos in the international community, and that is dangerous. it's quite possible if we don't lead, somebody else will. and perhaps it will be someone who does not share our values and compassion, the rights of the individual, liberty and freedom. i could not agree more, and i hope other senators appreciate what's at stake.
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just this past -- just as past generations rallied to meet the challenges of the great depression, the nazis and the cold war, we'll bear the responsibility if we fail to meet the challenges of today. i wonder in my parents' generation, if this country had not rallied behind president truman and secretary george marshall, we have the marshall plan, which to many people was very unpopular that we would give aid to countries we had just been at war with. what a different world it would be today if we had not helped rebuild europe and aid in japan. it's no wonder other countries, our allies and competitors are spending more each year to project influence around the world and to compete in the global marketplace. great britain's conservative
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government is on the path to increase international development assistance to .7% of its national budget. you might say only .7% of its national budget. of course the united states is .2% of our national budget. and our leadership, the united states leadership is getting challenged most since the cold war. in latin america, larger market for u.s. exports than any other region except the european union, our share is shrinking while china's is growing. it is the same story everywhere. there is simply no substitute for u.s. global leadership. the world is changing profoundly, and we can't afford to suckdom isolationism -- to succomb to isolationism. the funding in the bill i hope we will be bringing up on foreign operations enables us to
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engage with allies, defeat our competitors and deter our adversaries. it may have been an attractive target for campaign speeches and bumper sticker politics but without it we cannot meet the growing threats of our struggling economy and national security. our bill, which senator graham and i hope label to bring to the floor of this body, is reported by the appropriations committee on a bipartisan vote of 28-2, is $6 million below the president's budget request. it scales back many department of state and u.s. agency for international development operation programs. it will force significant reductions in planned expenditures. i wish it did not, but i also agree with every single budget because of the problems we have
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here must show restraint. i doubt there's any member of congress, either party, either body who does not care if the united states becomes a second or third-rate power. i think all of us in congress expect the united states to lead, to build alliances, to help american companies compete successfully to protect the interests and security of our citizens. yet, there are unmistakable signs our global influence is already waning. it's not preordained, madam president, the united states will remain the world's dominant power. former secretary rice said "we don't lead, somebody else will." if we don't lead, somebody else will. and i think every one of us could sit here and think through in our minds some of the other countries that would be the leaders. and i shutter to think of some
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of them. you can't have it both ways. we can't expect others to fall if we don't lead -- others to follow if we don't lead. and we can't lead if we don't pay our way. we need to stop acting like these investments do not matter, that the state department is not important, and that we do not need the united nations, that what happens in brazil, russia, the philippines, somalia and other countries does not matter, and the global threat to the environment, public health and safety will somehow be solved by others. just one small matter, think of this: the most serious diseases in the world are only an airplane trip away from our shore. isn't it in our interest to help eradicate polio, to help
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forestall what really plagues, to help save children from dying from easily preventible diseases? this year's state foreign operations bill which is drafted in a bipartisan manner balances priorities, funding for these programs was requested by republicans and democrats. i must say the total number of requests that we received from both parties dwarf what senator graham and i had available to spend. there are no earmarks in this bill because of the budget cuts, members on my side do not get close to everything they wanted and neither do members on senator graham's side. but to anyone who thinks that the 1% of the federal budget that we spend on international diplomacy and development is too much, this bill will freeze embassy and koupbs hrat operations and curtail programs that in some cases are
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international organizations that we're obligated by treaty to pay. it will be interesting, in some countries we're going to have to cut back our consolate services or our embassy services while our competitors increase theirs, hoping to pick up the markets for their country's goods that we won't be able to compete for for american goods. the country's at a crossroads. we can retreat from the world as some seem to want, while china and other competitors continue to expand and influence or we can remain a leader. this senator hopes we'll have the sense to choose the latter course. i was barely a child at the end of world war ii, but i washed as a child -- i watched as a child as soldiers came back.
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i watched america's influence grow. i saw it as a young student both in college and law school. i saw students who came to this country to learn why we were so great. i saw members of my family and friends join the peace corps and do other things, to go around the world to spread our influence. and everywhere i went when i became a senator, around the world i'd hear from people, thank goodness america came in and helped us. you know, i would hope that my children and my grandchildren would not hear a different story when they travel abroad. the funding in this bill which is strongly supported by the department of defense is along with the united states military, the best form of insurance the american people have. so i want to thank chairman inouye and senator cochran for
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their support of the subcommittee's budget. i want to thank senator graham who is a highly informed and passionate advocate for united states corporal leadership. i appreciate his input as well as the other members of the appropriations committee from both parties. madam president, it is easy for us to stand up and speak about how we want america to be number one. it's easy to sit on the sidelines and say you'd thraoeubg win the new york -- you'd like to win the new york marathon but you don't want to go through the effort to train for it. if we want to be number one, it doesn't happen overnight. we have many, many things we have to do that we're not doing. one thing that is united, some
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of the great leaders of our country, both republicans and democrats, is their desire to expand the most positive way america's influence around the world. one, so that it would help others. but, two, because it protects us. it protects us. madam president, i hope we will get to this bill. i hope we will not, if we do, i hope we will not find ourselves tangled in knots with the sloganeering or special interest amendments, but rather do it with only one interest in mind: that of the united states of america. madam president, i would yield the floor and suggest the absence of a quorum. the presiding officer: the clerk will call the roll. quorum call: louisiana.
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ms. landrieu: thank you, madam president. are we in a quorum call? the presiding officer: we are. ms. landrieu: i ask unanimous consent to dispense with the quorum call. the presiding officer: without objection. ms. landrieu: the president, i rise to speak for a few moments on a very special anniversary that we're celebrating, not just here in washington but around the country, and that is the 40th anniversary of the close-up foundation. familiar to us all, it is a foundation that was started in 1971. close-up has worked for four decades to promote responsible
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and informed participation in the democratic process through washington-based civic education programs and classroom publications. i had the pleasure myself, madam president, of participating in one of the first-ever close-up programs back in 1972, so i was the second year when the program was in its fledgling stage. little did i believe then or know then that i would be a member of the united states senate, but i can remember the tremendous impact that that program had on me at that age. it was the first time i had ever visited washington, d.c., and i can tell you without the close-up program, i probably would not have made that trip until many years later, but it made a lasting impression on me and i believe gave me some idea back then of a potential career in public service.
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so i am very proud to be an alum of this important program, and i'm delighted to help celebrate that tonight later at a reception for the 40th anniversary which is today. close-up's mission is to inform, educate and inspire young people to be active citizens in our democracy. close-up seeks to create a generation of americans that exercise their rights and accept the responsibilities of citizenship. each year, close-up serves thousands of high school and middle school students and their teachers on washington-based government and citizenship education programs. these programs demonstrate that an active citizenry is necessary for the perpetuation of our democracy, and they provide students with the knowledge and skills to participate firsthand,
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hands on, seeing is believing, being here in washington, seeing the buildings, experiencing firsthand the way the senate and the house operate, seeing the supreme court in action leaves a lasting impression, believe me, on these students. since the 1970's, i know that my colleagues will join me in the pride that 750,000 students and teachers from around the country have participated in close-up programs. participating students return to their schools and share with their classrooms, with their student bodies what they learn and experienced, so while we have only -- we have had 750,000 students participate, we have directly touched millions of students and preaches and family members as these students go back and relay their very fine
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experiences. students who warp in close-up washington travel to our nation's capital usually for about a week, join with their peers from all over the united states to live and learn together during an intensive, inspiring and skilled building program. the program is designed to enrich students' knowledge of the basic concepts and institutions of the federal government, an important part of our democracy, and to develop a practical understanding of the process of the democratic political system and the role of citizens in this system which is central, as you know. to engage students, expert instructional staff use best practices and methodiologies, including role modeling, small group discussions, stimulations and student-driven interaction with key policy experts. in other words, madam president, this isn't just a tour of
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washington, it's not just a tour of the buildings. it's an interactive, hands-on experience for young middle school and high school students to really have a better understanding of how their government operates, and if you think about it, they understand by maybe reading the paper and talking to friends how their local government operates. they get a sense of how their state governments operate, but without a real opportunity to visit the nation's capitol, which many of these students might not have, how will they really get a feel for what goes on here, which is very, very important? each year, close-up washington program participants engage in 1,000 meetings with members of congress and their staffs on capitol hill. our capitol's institutions and historic sites are used as classrooms to help students explore the links between history and contemporary
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political issues. it brings it alive to them. it makes it real for them, and that's why it's so important for us to continue this program. students also learn and practice the habits of active, effective citizenship with an intense emphasis on civil discourse. i think finally, madam president, one of the most important and commendable aspects of the close-up program is its accessibility to economically disadvantaged students, and i want to take a minute to stress this. there are many programs that are sponsored directly or indirectly by the federal government that allow students to come to washington, and then of course there are many privately funded activities, but this is the only federal program that i know that really reaches out in a special way to students that would be
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unable to come under any other circumstance. they just couldn't afford it. their families can't afford it. and so it would be out of reach for many of them. that's what's so important about close-up. the other important thing, it's not just for the kids in the class that are 4.0 students. many students come here on academic scholarships or they are chosen because of their academic prowess. this is really for the average kid, as well as those that are academically -- achieving academically, but it's for the average kid, the kid that we depend on to be our citizens for the future. and so because of that, it's especially important for us i think to continue this opportunity. close-up provides a diverse program experience for its participants and has provided
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over $100 million in fellowship assistance to students and teachers from underserved communities through public funding and a committed network of corporate and philanthropic donors. so with the federal money that serves as its base, we get additional support from individuals and from foundations to leverage that resource to provide an opportunity for kids who would never be able to see with their own eyes the capitol or the white house or would never be able to walk into the supreme court to actually see it and touch it and to experience it. if it sparks an interest in 1/4 of the children that come, that would be great but i think it sparks an interest in almost 100% of them in some way. when they leave here, they are forever changed in a positive way and can become real active participants in this democracy. so at a time when students
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throughout the united states show an alarming lack of proficiency in civics as demonstrated by a recent result in a national assessment of education progress, testing fourth, eighth and 12th graders, close up continues to work to engage young people so that they can understand the political process, they find their own voice and they embrace the rights and responsibilities of citizenship, which is indeed a gift and they learn to appreciate that gift and to participate more fully in this democracy. so, madam president, i want to commend and congratulate close up for 40 years of excellent service. i hope it will continue for another 40 years, and i'm proud to be a strong supporter of the close up program and urge my colleagues as we have an opportunity to support the funding for this program even in these tough budgetary times. and i yield the floor and suggest the absence of a quorum.
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the presiding officer: the clerk will call the roll. quorum call:
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